Table 14-4

Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising budget to compete for customers.If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit.Table 14-4 shows the payoff matrix for this advertising game.
-Refer to Table 14-4.What is the Nash equilibrium in this game?

Question

Table 14-4
  
Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.Each firm must decide on whether to increase its advertising budget to compete for customers.If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit.Table 14-4 shows the payoff matrix for this advertising game.
-Refer to Table 14-4.What is the Nash equilibrium in this game?

Quizplus · Accepted Answer

In a Nash equilibrium, each player's strategy is optimal given the strategy of the other player. If both Alistair and Baine increase their advertising budgets, neither can benefit by unilaterally changing their strategy, making it a Nash equilibrium.

Table 14-4 Alistair Luggage and Baine Baggage Are the Only Firms Selling