Refer to the normal-form game of advertising shown below. Firm A Firm B Advertise Do Not Advertise Advertise...
Refer to the normal-form game of advertising shown below.
Firm A |
Firm B | |||
| Advertise | Do Not Advertise | |||
| Advertise | $0,$0 | $175,$10 | ||
| Do Not Advertise | $10,$175 | $125,$125 | ||
Consider the advertising game in Figure 10-17. Firms A and B know
the game will be played for exactly five periods. What is a Nash
equilibrium to this game?
{advertise, do not advertise}
{advertise, advertise}
{do not advertise, do not advertise} provided the interest rate is less than 0.10 percent
{advertise, advertise} provided the interest rate is less than 0.50 percent
Homework Answers
| Advertise | dont | |
| Advertise | (0,0) | (175*,10•) |
| Don't | (10*,175•) | (125,125) |
Now Nash eqm of stage game :
(Dont advertise, advertise) & (advertise, don't )
if game is repeated for a finite time period, then only Nash eqm of stage game is played every period, no other strategy pair can be sustained as SPNE.
answer is option A)
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