Test: Exam 7 Time Remaining: 01:40:15 This Question: 6 pts 17 of 20 (19 complete

Question

Test: Exam 7 Time Remaining: 01:40:15 This Question: 6 pts 17 of 20 (19 complete) This Test: 120 Refer to the payoff matrix at right for the profits (in S millions) of two firms (A and B) making a decision to advertise or not. Which of the following is the outcome of the dominant strategy without cooperation? Firm B's Strategy O A. Firm A chooses not to advertise while fim B chooses to advertise. Both firm A and firm B choose not to advertise. Firm A chooses to advertise while firm B chooses not to advertise. Both firm A and firm B choose to advertise. Advertise Dont Advertise B. ° C. D. $2 $5 Advertise $2 $20 Firm A's Strategy $20 $10 Don't Advertise $5 $10 Click to select your answer ools>

Explanation / Answer

THe answer is B -) Both Firm A and Firm B choose not to advertise.

because, A dominant strategy is when both the player choose strategy that maximize his utility without concerning what the other firm do . so in strategy of dont advertise, both firm have maximum profit of $10 and thus it is a dominant strategy.

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