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12 July, 22:58

Two firms compete by advertising. Given the payoff matrix to this advertising game, identify each firm's best response to its rival's possible actions. If Firm 2 does not advertise, then Firm 1 should ▼ advertise not advertise and if Firm 2 advertises, then Firm 1 should ▼ not advertise advertise. If Firm 1 does not advertise, then Firm 2 should ▼ not advertise advertise and if Firm 1 advertises, then Firm 2 should ▼ not advertise advertise. Does either firm have a dominant strategy? Firm 1's dominant strategy is to ▼ not advertise advertise and Firm 2's dominant strategy is to ▼ not advertise advertise. What is the Nash equilibrium? A. The Nash equilibrium is for both firms to advertise. B. The Nash equilibrium is for Firm 1 to advertise and Firm 2 to not advertise. C. This game has no Nash equilibria. D. The Nash equilibrium is for both firms to not advertise. E. The Nash equilibrium is for Firm 1 to not advertise and Firm 2 to advertise.

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  1. 13 July, 00:29
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    If Firm 2 does not advertise, Firm 1 should advertise

    If Firm 2 advertises, then Firm 1 should also advertise

    Firm 1 dominant strategy is to advertise

    Firm 2 dominant strategy is to advertise

    1. A. Nash equilibrium is for both Firms to advertise.

    Explanation:

    Nash equilibrium is a state where interactions by different firms in a matrix is involved. No firm can gain by a unilateral change of strategy if other firm does not changes its strategy. It is a situation where there is optimal when there is no deviation from the initial strategy. Here firm 1 can by advertise and Firm 2 can also optimize by advertising.
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