Question

Suppose only two airlines, United and Delta provide flights between Atlanta and Greenville. Both firms must choose whether to advertise or not advertise.The advertising straategies with corresponding profits are depicted in the payoff matrix. United Aitlines profits are in blue and Deltas Airlines are in red.United Airlines dominant strategy is advertise or not advertise ( choose one),and Delta donminant strategy is to advertise or not advertise (choose ones)What is the Nash equilibrium for this game? (choose one)a) United will choose to advertise and Delta will choose not to advertiseb) United will choose not to advertise and Delta will choose to advertisec) United and Delta will both choose to advertised) United and Delta will both choose not to advertise

Answer 1

Answer and Explanation:

(1) A dominant strategy is a strategy selected by one player regardless of the other player 's strategy.

According to the question

United dominant strategy is to Advertise, as it contains higher payoff ($9,000 > $1,000 and $16,000 > $11,000).

While on the other hand, Delta dominant strategy is to Advertise, as it contains higher payoff ($9,000 > $1,000 and $16,000 > $11,000).

(2) If Delta advertises, the best option for United is to advertise as the payout is higher($9,000 > $1,000).

If Delta does not advertise, the better option for United is to advertise as the payoff is higher($16,000 > $11,000).

The best strategy for Delta as United Advertises is to advertise because the payoff is higher ($9,000 > $1,000).

If United doesn't advertise, the best strategy for Delta is to advertise as the payoff is higher($16,000 > $11,000).

Hence Nash equilibrium is: (United Advertises, Delta Advertises)