If you advertise and your rival advertises, you each will earn $4 million in pro

Question

If you advertise and your rival advertises, you each will earn $4 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 $1 million and the non advertising firm will earn $5 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is

Select one:

a. For neither firm to advertise.

b. None of the statements associated with this question are correct.

c. For each firm to advertise.

d. For your firm to advertise and the other not to advertise.

Explanation / Answer

a. For neither firm to advertise.

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