Suppose that the editors of Time and Newsweek are trying to decide upon their cover story for the week. There were two major news developments: The leaking of a clandestine CIA officer’s identity and a terrorist suicide bombing in Amman, Jordan. It is important that the news weeklies not choose the same cover story since some readers will buy only one magazine when they might otherwise buy both. The choice of cover story depends on newsstand sales. The editors believe that 20 percent of newsstand buyers are interested in the CIA story, while 80 percent are interested in the terrorist bombing. If both news magazines run the same cover story, they will evenly share the market, but if they run different cover stories, each will get that share of the market. This static game is depicted in the following figure.

a. Does either news weekly have a dominant strategy?

b. What is the Nash equilibrium strategy profile for this game?

Transcribed Image Text:

Newsweek CIA Terrorism CIA (10, 10) (20,80) Time Terrorism (80,20) (40,40) Payoffs: (Time, Newsweek)