Game Matrix III

The following questions refer to the game matrix below. Each firm has a choice of advertising, Ads, or not advertising, No ad. The profits each gets depend upon which it chooses.

-Refer to Game Matrix III.The Nash equilibrium is to be found where
A) neither firm advertises.
B) Firm A advertises,Firm B does not.
C) Firm A does not advertise but Firm B does.
D) both firms choose to advertise.

Question

Game Matrix III

The following questions refer to the game matrix below. Each firm has a choice of advertising, Ads, or not advertising, No ad. The profits each gets depend upon which it chooses.

-Refer to Game Matrix III.The Nash equilibrium is to be found where
A) neither firm advertises. 
B) Firm A advertises,Firm B does not. 
C) Firm A does not advertise but Firm B does. 
D) both firms choose to advertise.

Quizplus · Accepted Answer

In this game, if one firm advertises while the other does not, the advertising firm will earn a higher profit. Therefore, choices A and C are dominated strategies. 
If both firms advertise, they end up with the same payoffs as when both do not advertise. This is because the advertising costs cancel out, so both firms end up in the same position they were in without advertising. Therefore, the Nash equilibrium is for both firms to advertise.

Game Matrix III The Following Questions Refer to the Game Matrix Below. Each