question 4

Question 4 (3 marks) Consider the decisions facing two cigarette companies, Benson & Hedges and Philip Morris. The following table shows how the profits of the two companies depends on their actions. Benson & Hedges' decision Advertise Don't advertise Benson & Hedges get $3b Benson & Hedges get $2b Philip Morris' Advertise profit profit Decision Philip Morris get $3b profit Philip Morris get $5b profit Benson & Hedges get $5b Benson & Hedges get $4b Don't profit profit advertise Philip Morris get $2b profit |Philip Morris get $4b profit a) What is the dominant strategy for Benson & Hedges? For Philip Morris? Explain. b) Define Nash Equilibrium. What is the Nash Equilibrium for the decision? c) Define prisoner's dilemma. Is this game a prisoner's dilemma? Explain