The managers of Alpha and Beta must make repeated advertising decisions simultaneously at the beginning of every month.They choose either low or high levels of advertising expenditure.They both employ a discount rate of 2.5 percent per month. 
Beta expects punishment to last for two months after being caught .What would be the value-maximizing decision for Beta?
A) Cooperate since $3,000 > PVBenefits of cheating.
B) Cooperate since $6,500/(1.025) > PVBenefits of cheating.
C) Cheat since PVBenefits of cheating > $2,820.
D) Cheat since PVBenefits of cheating < $5,641.
Correct Answer:
Verified
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