d30 QUESTION 3 Exhibit 134 shows the advertising strategies

d.$30 QUESTION 3 Exhibit 13-4 shows the advertising strategies of two oligopolistic firms. The dominant strategy: Exhibit 13-4 Firm B Do Not Advertise Advertise Do Not Advertise $60 milli S50 million $70 million, $10 million Fim A Advertise $20 million, $70 million $50 Million, $40 million a. for both firms is to advertise. b. for both firms is to not advertise. c. for Firm A is to advertise, while that for Firm B is to not advertise. d. for Firm A is to advertise, while that for Firm B is to not advertise. QUESTION 4

Solution

a) for both firms is to advertise.

strategy is a strategy for a player i.e. best response to all strategy profile of other player. Both players A and B are able to earn higher payoff when they choose Advertise irrespective of the decision of other player. So, both have dominant strategy of choosing to advertise.