Question

Martha and Oleg are competitors in a local market and each is trying to decide if it is worthwhile to advertise. If both of them advertise, each will earn a profit of $5,000. If neither of them advertise, each will earn a profit of $10,000. If one advertises and the other doesn't, then the one who advertises will earn a profit of $15,000 and the other will earn $7,000. To earn the highest profit, Martha

a. should advertise, and she will earn $5,000.

b. should advertise, and she will earn $15,000.

c. should not advertise, and she will earn $10,000.

d. has no dominant strategy

Answer 1

d

Step-by-step explanation:

Dominant strategy is the best option for a player regardless of what the other player is playing.

The payoffs for Martha if she advertises is either $5000 or $15000

if she does not advertise, it is either $10,000 or 7000

looking at these figures, there is no option that consistently yields a better option. thus there is no dominant strategy

If for example,

The payoffs for martha if she advertises is either $5000 or $15000

if she does not advertise, it is wither $3,000 or 7000

Advertising consistently yields a better option, thus her dominant strategy would be to advertise