If you advertise and your rival advertises,you each will earn $5 million in profits.If neither of you advertises,you will each earn $10 million in profits.However,if one of you advertises and the other does not,the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million.Which of the following is true?
A) A secure strategy for firm A is to not advertise.
B) A secure strategy for firm B is to not advertise.
C) Firm A does not have a secure strategy.
D) None of the preceding answers is correct.

Question

Quizplus · Accepted Answer

A secure strategy ensures a firm is protected against the worst possible outcome. In this scenario, if a firm chooses not to advertise and the rival does, the firm earns only $1 million, which is the worst outcome. Advertising guarantees at least $5 million, regardless of the rival's action, making it a more secure strategy than not advertising. Therefore, the statements suggesting not advertising as a secure strategy are incorrect, and since both firms face the same conditions, the claim that one does not have a secure strategy while not addressing the strategy of the other is also incorrect.

If You Advertise and Your Rival Advertises,you Each Will Earn