Question

Multiple Choice 10 (3 points) Unanswered Nike Sportwear and Under Armor are engaged in an advertising war. The game depicted below represents the possible outcomes (in millions of dollars) of different advertising strategies. Each company can choose to either engage in an extensive advertising campaign (Advertise) or to not advertise (Don't Advertise). Both companies must choose their strategy simultaneously. Which of the following strategies lead to Nash equilibrium? A: Advertise, B: Advertise A: Don't Advertise, B: Advertise C A: Advertise, B: Don't Advertise A: Don't Advertise, B: Don't Advertise

Answer 1

It shall be noted that as per the given game plan and outcome, if A choose to "Advertise" B would choose to Advertise as payoff of $7 is greater than $5

If A choose to "Not Advertise", B would advertise as payoff of $34 is greater than $20

Thus, the dominant strategy of player B is "Advertise"

Similarly, if B choose to "Advertise" A would choose to Advertise as payoff of $7 is greater than $5

If B choose to "Not Advertise", A would advertise as payoff of $34 is greater than $20

Thus, the dominant strategy of player A is "Advertise"

Thus, nash equilibrium is "Advertise, Advertise"

Hence, option A is correct.