Zippy's and Tony's are rival pizza restaurants in a small town. (Together they form a local duopoly.) Zippy's management determines that if it increases its advertising expenditures, it will increase profits regardless of whether Tony's increases its advertising budget. Based on this information, we can conclude that

Question

Quizplus · Accepted Answer

Zippy's having a dominant strategy means it has an optimal option regardless of Tony's decision. Thus, Zippy's can increase its advertising budget and expect to increase its profits, regardless of what Tony's does. The fact that Tony's decision does not impact Zippy's decision means that this is a one-time game. The question does not provide enough information to conclude whether a Nash equilibrium will be reached, and there is no mention of first-mover advantages, so choices C and D can be eliminated. Therefore, the best answer is B.

Zippy's and Tony's Are Rival Pizza Restaurants in a Small