There are two independent dealers for Sporto automobiles in a large city. The dealers decide to run a cooperative advertising campaign in which both dealers are listed in local newspapers ads, and they can purchase larger ads that are more likely to attract attention and generate more auto sales if the dealers commit more funds to the joint advertising budget. Is this an example of a cooperative constant-sum game?
A) Yes, each firm can contribute zero to 100 percent of the advertising budget, so this is a constant-sum game.
B) Yes, all negotiated outcomes between two firms are cooperative and constant-sum situations.
C) No, the outcome of the advertising campaign depends on how much money the firms contribute to the campaign, so it is not constant sum.
D) No, the firms are independent, so their interaction cannot be cooperative.

Question

Quizplus · Accepted Answer

In a constant-sum game, the total benefit or loss is constant, meaning that any gain for one player is a loss for the other player. In this advertising scenario, the total benefit generated from the advertising campaign will increase as both dealers contribute more funds. Therefore, the outcome is not constant sum.

There Are Two Independent Dealers for Sporto Automobiles in a Large