Zippy's and Tony's are rival pizza restaurants in a small town (together they form a local duopoly). Zippy's management determines that if it increases its advertising expenditures, it will increase profits regardless of whether Tony's
increases its advertising budget. Based on this information, we can conclude that:
A. this is a one-time game.
B. Zippy's has a dominant strategy in this advertising game.
C. this advertising game will reach a Nash equilibrium.
D. Zippy's has first-mover advantages in this advertising game.
Answer: B
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"Coffee Prices Sink As Demand Falls." The newspaper heading
A) assumes the law of demand does not hold. B) confuses demand with quantity demanded. C) misunderstands the role of supply in price formation. D) reverses the actual relationship between price and demand. E) uses the concept of demand correctly.
Refer to Figure 15-14. From the monopoly graph above, identify the following:
a. The profit maximizing price b. The profit maximizing quantity c. The area representing deadweight loss d. The area representing the transfer of consumer surplus to the monopoly