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5. To advertise or not to advertise Suppose that two firms, Frankencakes and Thinley's, are the only sellers of crepes in some hypothetical market. The
5. To advertise or not to advertise Suppose that two firms, Frankencakes and Thinley's, are the only sellers of crepes in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Thinley's Advertise Doesn't Advertise Advertise 10, 10 18, 2 Frankencakes Doesn't Advertise 2, 18 11, 11 For example, the lower left cell of the matrix shows that if Thinley's advertises and Frankencakes does not advertise, Thinley's will make a profit of $18 million, and Frankencakes will make a profit of $2 million: Assume this is a simultaneous game and that Frankencakes and Thinley's are both profit-maximizing firms
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