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following hypothetical payoff matrix to answer (a) and (b): Firm B Strategy Advertise Don't Advertise Firm A Advertise 4,4 20,1 Don't Advertise 1,20 10, 10 (a) Is there a dominant strategy for Firm A and Firm B? Explain
following hypothetical payoff matrix to answer (a) and (b): Firm B Strategy Advertise Don't Advertise Firm A Advertise 4,4 20,1 Don't Advertise 1,20 10, 10 (a) Is there a dominant strategy for Firm A and Firm B? Explain. (b) What is (are) the Nash equilibrium(s) in the above game? Explain.
Expert Solution
(A) Given that firm A choose advertise, firm B's best response is advertising (4).
Given that firm A choose not advertise, firm B's best response is advertising (20).
So, firm B's best response is advertising as it is always chosen by firm B.
Given that firm B choose advertise, firm A's best response is advertising (4).
Given that firm B choose not advertise, firm A's best response is advertising (20).
So, firm A's best response is advertising as it is always chosen by firm A.
(B) There is only one Nash equilibrium which is (Advertising, Advertising) = (4, 4) as it is chosen by both
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