Two stores that compete for most of the market in a town must choose their adver
ID: 1223039 • Letter: T
Question
Two stores that compete for most of the market in a town must choose their advertising levels simultaneously. The following payoff table facing the two firms, smith’s and Dale’s, shows the weekly profit outcomes for the various advertising decision combinations. Use this payoff table to answer the following 2 questions .
Dale’s advertising level
High
Low
Smith’s
advertising level
High
A
$11,000, $6,000
B
$8,000, $7,000
Low
C
$9000, 7,000
D
$7,000, $8,000
Smith’s:
a.has a dominant strategy: choose a high level of advertising.
b.has a dominant strategy: choose a low level of advertising.
c.has a dominated strategy: choose a high level of advertising.
d.has a dominated strategy: choose a low level of advertising.
e.both b and c.
f.both a and d.
Dale’s advertising level
High
Low
Smith’s
advertising level
High
A
$11,000, $6,000
B
$8,000, $7,000
Low
C
$9000, 7,000
D
$7,000, $8,000
Explanation / Answer
We know that Dominant strategy means that the strategy of players best move to make regardless of what the opponant do. Also this is a optimal strategy.
Here the Dominant strategy is :
Chhose high level of advertising
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.