Economics for Today 9th Edition by Irvin Tucker

Exercise 20

Assume the payoff matrix in Exhibit 7 applies to spending for advertising rather than airline fares. Substitute " Don't Advertise " for " High fare " and " Advertise " for " Low fare." Assume the same profit and loss figures in each cell, but substitute " Marlboro " for " Delta Airlines ," and " Camel " for " American Airlines." Explain the dynamics of the model and why cigarette companies might be pleased with a government ban on all cigarette advertising.