Question

Consider the following information for a simultaneous move game: Firm Advertise Don't Advertise Advertise 90, 90 500, 50 Firm A Don't Advertise 50, 500 150, 250 If the two firms plan to be in business for 20 years, then the Nash equilibrium is for Each firm to advertise in early years, but not advertise in later years. Both firms to advertise in every year. Neither firm to advertise in early years but to advertise in later years. Both firms to not advertise in any year.

Answer 1

OPTION B IS CORRECT

have 2 fiom B Aduertise Don't Aduritise Aduchse 93,gok sootso homh Don't Adurt se 59,506 150, 256 for nash equilibrium we have to Check if firm А. Select Advertise Don't Aduertise What firm B select. and then mark these outcome as (* When this this is you get (*) on both pay off nash equilibrium. our CS Scanned with CamScanner

2 Now, Start with firm A from A Choose, Aduertise Advertise Don't Advertise 150 aot Since 90>5o. firm B Choose a duertise firm. A Choose Don't aduertise ,500 250 (500 7250) firm B Choose a duer tise CS Scanned with CamScanner

(3 a duertise Choose at firm B Similarly t aduernse 19ot Don't advertisel 50, 90 > 50, firm A choose advertise If firm B Choose Don't aduertise Soor 150 500 >150 firm. A Choose aduertise t option B is corret Both from to aduertise in every year get two (*) on those *) on these pay off (90 90 4 CS Scanned with CamScanner
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