(Figure: Oligopoly Pricing Strategy in Wireless TV Market I) Use Figure: Oligopoly Pricing Strategy in Wireless TV Market I. If both Spectrum and Sling advertise, then without any collusion:

A)Spectrum will stop advertising to maximize profits.
B)Sling will stop advertising to maximize profits.
C)there will be no incentive for either Spectrum or Sling to stop advertising.
D)there is an incentive for both Spectrum and Sling to stop advertising.

Question

(Figure: Oligopoly Pricing Strategy in Wireless TV Market I) Use Figure: Oligopoly Pricing Strategy in Wireless TV Market I. If both Spectrum and Sling advertise, then without any collusion:
​
 
A)Spectrum will stop advertising to maximize profits. 
B)Sling will stop advertising to maximize profits. 
C)there will be no incentive for either Spectrum or Sling to stop advertising. 
D)there is an incentive for both Spectrum and Sling to stop advertising.

Quizplus · Accepted Answer

If both Spectrum and Sling advertise, there is no dominant strategy for either firm to stop advertising. If one firm stops advertising, the other firm will gain a larger market share and be able to charge a higher price, leading to lower profits for the firm that stopped advertising. Therefore, there is no incentive for either firm to stop advertising.