Anna,Bill,and Charles are competitors in a local market,and each is trying to decide if it is worthwhile to advertise.If all of them advertise,each will earn a profit of $5000.If none of them advertise,each will earn a profit of $8000.If only one of them advertises,the one who advertises will earn a profit of $10,000 and the other two will each earn $2000.If two of them advertise,those two will each earn a profit of $6000 and the other one will earn $1000.If all three follow their dominant strategy,what will Anna do and how much will she earn
A)advertise and earn $5000
B)advertise and earn $6000
C)not advertise and earn $8000
D)advertise and earn $10,000

Question

Quizplus · Accepted Answer

For Anna, her dominant strategy is to advertise regardless of what the other players do. This is because no matter what the other players choose, Anna's best outcome is to advertise.

If none of the other players advertise, Anna earns $8000 by not advertising. However, if Anna advertises, she earns $5000 more, bringing her total profit to $13000.

If one of the other players advertises, Anna can earn $10000 by advertising herself. If she does not advertise, she only earns $2000.

If two of the other players advertise, Anna can either earn $6000 by advertising or only $1000 by not advertising. Again, advertising is the better option for Anna.

Therefore, regardless of what the other players choose, Anna's best choice is to advertise and earn $5000.

Anna,Bill,and Charles Are Competitors in a Local Market,and Each Is