Two firms compete by advertising. Given the payoff matrix to this advertising ga

Question

Two firms compete by advertising. Given the payoff matrix to this advertising game, identify each firm's best response to its rival's possible actions. If Firm 2 does not advertise, then Firm 1 should and if Firm 2 advertises, then Firm 1 should If Firm 1 does not advertise, then Firm 2 should and if Firm 1 advertises, then Firm 2 should Does either firm have a dominant strategy? Firm 1's dominant strategy is to and Firm 2's dominant strategy is to What is the Nash equilibrium? The Nash equilibrium is for both firms to not advertise. The Nash equilibrium is for Firm 1 to advertise and Firm 2 to not advertise. The Nash equilibrium is for Firm 1 to not advertise and Firm 2 to advertise. The Nash equilibrium is for both firms to advertise. This game has no Nash equilibria.

Explanation / Answer

If firm 2 does not advertise, then Firm 1 should not advertise

If firm 2 advertises, then Firm 1 should not advertise

If firm 1 does not advertise, then Firm 2 should advertise

If firm 1 advertises, then Firm 2 should advertise

Firm 1 has dominant strategy to not advertise, Firm 2 has dominant strategy to advertise

Nash Equilibrium: Firm 1 to not advertise, firm 2 to advertise

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