Suppose that there are only two pharmaceutical firms in the market for Covid-19

vaccine (Firm A and Firm B). Depending on whether each firm chooses to advertise

their vaccine or not, the payoff matrix for annual profits (in billions of dollars) is

shown in Table 3.A below:

Firm B

Table 3.A

Do not advertise

15, 1

10, 3

Advertise

11, 5

6, 8

Advertise

Firm A

Do not advertise

a) Refer to Table 3.A. Does any firm have a dominant strategy? Explain your

Review (End of your answer to Question 2) Question 3 (Total: 10 marks) Suppose that there are only two pharmaceutical firms in the market for Covid-19 vaccine (Firm A and Firm B). Depending on whether each firm chooses to advertise their vaccine or not, the payoff matrix for annual profits (in billions of dollars ) is shown in Table 3.A below: Table 3.A Firm B Advertise Do not advertise Advertise 11, 5 15, 1 Firm A Do not advertise 6, 8 10, 3 a) Refer to Table 3.A. Does any firm have a dominant strategy? Explain your reasoning. (4 marks) b) Is there a Nash equilibrium in this game? Explain. (3 marks) Suppose that the advertising game is now altered to Table 3.B below. Table 3.B Firm B Advertise Do not advertise Advertise 11, 5 Firm A 15, 1 Do not advertise 6, 8 20, 3 c) Refer to Table 3.B. Does any firm have a dominant strategy? Is there a Nash equilibrium in this game? Explain. (3 marks) O W DOLL