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Figure: Pricing Strategy in Cable TV Market I
-(Figure: Pricing Strategy in Cable TV Market I) Look at the figure Pricing Strategy in Cable TV Market I. If neither CableNorth nor CableSouth advertises, then without any collusion:
A) CableNorth will begin advertising to maximize profits.
B) CableSouth will begin advertising to maximize profits.
C) there will be no tendency for either CableNorth or CableSouth to begin advertising.
D) there is a tendency for both CableNorth and CableSouth to begin advertising.

Question

Use the following to answer questions:
Figure: Pricing Strategy in Cable TV Market I 
-(Figure: Pricing Strategy in Cable TV Market I) Look at the figure Pricing Strategy in Cable TV Market I. If neither CableNorth nor CableSouth advertises, then without any collusion:
A) CableNorth will begin advertising to maximize profits. 
B) CableSouth will begin advertising to maximize profits. 
C) there will be no tendency for either CableNorth or CableSouth to begin advertising. 
D) there is a tendency for both CableNorth and CableSouth to begin advertising.

Quizplus · Accepted Answer

If neither company advertises, they are likely in a Nash equilibrium where neither has an incentive to unilaterally change their strategy, assuming advertising does not significantly increase profits.

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