Martha and Oleg are competitors in a local market and each is trying to decide i
ID: 1205641 • Letter: M
Question
Martha and Oleg are competitors in a local market and each is trying to decide if it is worthwhile to advertise. If both of them advertise, each will earn a profit of $5,000. If neither of them advertise, each will earn a profit of $10,000. If one advertises and the other doesn't, then the one who advertises will earn a profit of $15,000 and the other will earn $7,000. To earn the highest profit, Martha a. should advertise, and she will earn $5,000. b. should advertise, and she will earn $15,000. c. should not advertise, and she will earn $10,000. d. has no dominant strategy
Explanation / Answer
Martha has no dominant strategy,as the advertising policy is not that much worthwhile it can be explain by prisoner's dilemma where one participant knows the strategy of another.