If you advertise and your rival advertises, you each will earn $4 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 $1 million and the non-advertising firm will earn $5 million. If you and your rival plan to be in business for 10 years, then the Nash equilibrium is Multiple Choice for each firm to advertise every year. for neither firm to advertise in early years but to advertise in later years.

q52 If you advertise and your rival advertises, you each will earn 14 million in profits. If neither of you advertises, you will each earn 20 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn 10 million and the non-advertising firm will earn 16 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is a. for each firm to advertise. b. for the other firm to advertise and your firm not to advertise. c. for your firm to advertise and the other not to advertise. d. for neither firm to advertise.

Airbus and Boeing are the two largest producers of commercial aircraft in the world. They are each trying to determine whether or not they should build an ultra-large passenger plane. They have both decided that building such a plane would be profitable, but only if one of them produces it. The market is simply not large enough for them to both make profits selling this new plane. Consequently, if they both produce the plane, each will lose $10 billion. If only one of them produces, that firm will make $50 billion. Regardless of what the other does, if they choose not to produce the plane, they neither make nor lose money. a. Construct the normal or strategic form of this game and find the pure strategy NE. b. Airbus is a corporation in the European Community while Boeing is an American corporation. The EC has a long history of subsidizing Airbus as well as other man- ufacturers it deems important. Let us remodel this game assuming that the EC tells Airbus that if Airbus produces the…

PLAYER B                                                                LEFT                                     RIGHT                             UP                      5 FOR A, 30 FOR B               10 FOR A, 12 FOR B PLAYER A                           DOWN               -2 FOR A, 10 FOR B             8 FOR A, 15 FOR B In the above game, the players are seeking to maximize the number they recieve.  They choose at the same time.      What is the Nash equillibrium?     Player A will choose UP and player B will choose LEFT   Player A will UP and player B will choose RIGHT   Player A will choose DOWN and player B will choose LEFT   Player A will choose DOWN and player B will choose RIGHT   Player A will choose LEFT and player B will choose UP   Player A will choose LEFT and player B will choose DOWN   Player A will choose RIGHT and player B will choose UP   Player A will choose RIGHT and player B will choose DOWN