There are two firms in an industry, Firm A and Firm B.  If firm A and firm B both advertise, they each will earn $5 million in profits. If neither firm advertises, they will each earn $10 million in profits. However, if one firm advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. List all Nash equilibrium to this game.     Both firms advertise     Firm A advertises and Firm B does not     Firm B advertises and Firm B does not     Neither firm advertises     No Nash equilbrium exists

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter15: Strategic Games
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There are two firms in an industry, Firm A and Firm B.  If firm A and firm B both advertise, they each will earn $5 million in profits. If neither firm advertises, they will each earn $10 million in profits. However, if one firm advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million.

List all Nash equilibrium to this game.

   

Both firms advertise

   

Firm A advertises and Firm B does not

   

Firm B advertises and Firm B does not

   

Neither firm advertises

   

No Nash equilbrium exists

 

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