Two stores (A&B) want to expand their market shares by means of advertisement. The payoffs of the two stores are portrayed in the following table:
|
Store B |
|||
|
Advertise |
Do NOT Advertise |
||
|
Store A |
Advertise |
$95 millions; $80 millions |
$305 millions; $55millions |
|
Do NOT Advertise |
$65 millions; $285millions |
$165 millions; $115millions |
|
1. What is a dominant strategy? (From your textbook)
2. Does either store have a dominant strategy? Explain.
3. What is a Nash Equilibrium? (From your textbook)
4. What is the payoff of each store in the Nash Equilibrium. Explain your answer!