The FI Corporation’s dividends per share are expected to grow indefinitely by 5% per year. a. If this year’s year-end dividend i
1 answer:
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Answer:
Each company should advertise
Explanation:
Nash equilibrium a concept in game theory which describes the optimal strategy for a party in a non co-operative game. It is the best strategy for the player regardless of what the other player is playing.
In this question, if both parties advertise, they earn $3 million .
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 $1 million
If neither of you advertises, you will each earn $7 million in profits.
The profits from advertising can either be 3 million or 10 million while the profit from not advertising can either be 7 million or 1 million.
We can see the gains from advertising is more than the gain of not advertising. So the bash equilibrium is to advertise.
Please check the attached image for a table showing this game
I hope my answer helps you
