Question
Two firms Stars and Moons are the only sellers of coffee in SUSS and they simultaneously decide whether to advertise. If Stars (Moons) advertises, Moons
Two firms Stars and Moons are the only sellers of coffee in SUSS and they simultaneously decide whether to advertise.
If Stars (Moons) advertises, Moons (Stars) earns $150 if it advertises and $200 if it does not. If Stars (Moons) does not to advertise, Moons (Stars) earns $120 if it follows suit but only $100 if it spends on advertising.
(a) Construct the payoff matrix.
(b) Are there dominant or dominated strategies?
(c) Is there a Nash equilibrium?
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Macroeconomics Principles Applications and Tools
Authors: Arthur O'Sullivan, Steven Sheffrin, Stephen Perez
9th edition
978-0134089027, 134089022, 978-0134420684
