Final answer:
In the context of monopolistic competition, when individual firms' advertising efforts merely shift sales among them without increasing total industry sales, it creates a situation comparable to the prisoner's dilemma.
Step-by-step explanation:
If advertising by an individual firm does not add to total industry sales but merely attracts sales from other firms, the answer to the question is: o advertising is like a prisoner's dilemma.
Advertising, particularly in the context of monopolistic competition, is all about convincing consumers that one firm's products are differentiated from others.
When advertising spends by firms simply neutralize each other's efforts, it could result in a situation akin to the prisoner's dilemma, where all firms would benefit from not advertising, but each has an incentive to advertise to gain an advantage over the others.
When one firm advertises and the others do not, that firm potentially can attract sales at the expense of its competitors.
However, when all firms advertise, the industry’s expenditures on advertising may simply offset each other, and the total result could be equivalent to a scenario where no firm had advertised at all. This environment leads firms into a cycle where they feel compelled to advertise because their competitors do, even though collectively they might not gain from it.