-The above figure shows the payoff matrix for two firms,A and B,selecting an advertising budget.The firms must choose between a high advertising budget and a low advertising budget.A Nash equilibrium
A)occurs when both firms select a high advertising budget.
B)exists at any of the four possible strategy combinations because there is never an incentive to change strategy.
C)is for both firms to choose the low advertising budget because this yields the highest joint profit.
D)does not exist because firm A does not have a dominant strategy.

Question

-The above figure shows the payoff matrix for two firms,A and B,selecting an advertising budget.The firms must choose between a high advertising budget and a low advertising budget.A Nash equilibrium
A)occurs when both firms select a high advertising budget. 
B)exists at any of the four possible strategy combinations because there is never an incentive to change strategy. 
C)is for both firms to choose the low advertising budget because this yields the highest joint profit. 
D)does not exist because firm A does not have a dominant strategy.

Quizplus · Accepted Answer

A Nash equilibrium occurs when neither firm can improve its payoff by changing its strategy, given the strategy of the other firm. In this case, both firms choosing a high advertising budget is a Nash equilibrium because neither firm can improve its payoff by changing its strategy, given that the other firm is also choosing a high advertising budget.

-The Above Figure Shows the Payoff Matrix for Two Firms,A