(Solved) The diagram below shows the situation for two oligopolists A and B, in an advertising dilemma. \Pi_A and \Pi_B are the relevant profits. Answer
Question: The diagram below shows the situation for two oligopolists \(\mathrm{A}\) and \(\mathrm{B}\), in an advertising dilemma. \(\Pi_{\mathrm{A}}\) and \(\Pi_{\mathrm{B}}\) are the relevant profits. Answer the following questions based on the diagram.
- What is the dominant strategy for each firm?
- What is the Nash equilibrium for this game?
- If firms are in cell 4, does either have any incentive to move? Explain.
- Under what condition would firms end up in cell 1? Explain. Does either firm have an incentive to change if both are in cell 1?
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