As far as I can see it, there is only Nash Equilibrium in the whole
game.
Looking at the row for "A advertises":
B advertises = 5, 5
B does not advertise = 15, 1
It appears that "A and B" could be a NE. Check row "B advertises":
A advertises = 5, 5
A does not advertise = 1, 15
A has no potential gain by not advertising.
Now looking at the row for "A does not advertise":
B advertises = 1, 15
B does not advertise = 10, 10
There is no gain for B to not advertise, so let "B advertises":
A advertises = 5, 5
A does not advertise = 1, 15
Same situation as before, A will advertise.
Thus "both A and B advertise" is the only nash equilibrium.
On Oct 4, 10:19 pm, "Druid" <drui...@[EMAIL PROTECTED]
> wrote:
> . Consider the following information for a simultaneous move game: If
you
> advertise and your rival advertises, you each will earn $5 million in
> profits. If neither of you advertise, you will each earn $10 million in
> profits. However, if one of you advertises and the other does not, the
firm
> that advertises will earn $15 million and the non advertising firm will
earn
> $1 million. If you and your rival plan to be in business for 10 years,
then
> the Nash equilibrium is
>
> a) For each firm to advertise every year.
>
> b) For neither firm to advertise in early years, but to advertise in
later
> years.
>
> c) For each firm to not advertise in any year.
>
> d) For each firm to advertise in early years, but not advertise in
later
> years.
>
> . If you and your rival plan to be in business for only one year, the
Nash
> equilibrium is
>
> a) For each firm to advertise.
>
> b) For neither firm to advertise.
>
> c) For your firm to advertise and the other not to advertise.
>
> d) None of the above.
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