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In response to government concern over social norms, suppliers of high content alcoholic beverages like whiskey and vodka refrained from advertising on television

Economics

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In response to government concern over social norms, suppliers of high content alcoholic beverages like whiskey and vodka refrained from advertising on television. Industry spokesmen claimed that the voluntary ban was evidence of socially responsible behavior on the part of the industry. However, economists quickly pointed out that the multilateral decision to refrain from advertising saved all firms millions in advertising costs. The table below illustrates potential profits for duopolists in this industry, Oak River Bourbon and Old Mami Select Bourbon. a. Is there a dominant strategy and Nash equilibrium? Explain. b. Given this information, did these firms agree to the voluntary ban solely for the sake of social responsibility? Is this agreement likely to be sustained? Explain. AB Old Mami Advertise No Advertising Oak River Advertise 8110 2015 No Advertising