ANALYZING MANAGERIAL DECISIONS: Favoring a Government Ban on Advertising Cigarette manufacturers were among the first manufacturing companies even though they had companies to advertise extensively on television. advertised heavily on television since the 1940s. Older people today can still hum the heavily televised jingle, "Winston tastes good like a 1. Design a simple two-company game that illus- cigarette should," and recall the Old Gold Dancing trates why it might have been in the economic Cigarette Pack-an oversized dancing cigarette interests of the cigarette companies to support package with shapely female legs. They can also the ban. In designing the game, assume that remember beautiful women with black eyes as there is no regulation and that the two firms they testified that "Tareyton smokers would rather simultaneously choose between advertising fight than switch." John Wayne and other movie and not advertising. Display your hypothetical stars appeared in commercials to endorse payoffs in strategic form (see Figure 9.1) and cigarettes. Cigarette companies were the major highlight the Nash equilibrium. Explain the sponsors for many popular television shows. The intuition for why the firms in your example companies also paid to have cigarettes included in would favor regulation to ban advertising. the actual programs. In 1962, the cartoon charac- 2. Can you conclude from your example that ters Fred and Wilma Flintstone were shown all firms in all industries will favor bans on smoking Winston cigarettes. television advertising? Explain. Can you ever The U.S. federal Government banned television envision a situation where one firm might favor advertising of cigarettes starting in 1971. Interest- the ban and a competing firm might be against ingly the ban was supported by the leading cigarette it? Discuss