# Nash equilibrium / game theory

11. In a one-shot game, if you advertise and your rival advertises, you will each earn $5 million in profits. If neither of you advertise, your rival will make $4 million and you will make $2 million. If you advertise and your rival does not, you will make $10 million and your rival will make $3 million. If your rival advertises and you do not, you will make $1 million and your rival will make $3 million.

a. Write the above game in normal form.

Strategy Advertise Don't Advertise

Advertise 5, 5 10, 3

Don't Advertise 1, 3 2, 4

b. Do you have a dominant strategy?

Dominant strategy is not to advertise

c. Does your rival have a dominant strategy?

Dominant strategy is not to advertise

d. What is the Nash equilibrium for the one-shot game?

For A it's don't advertise; for B it's advertise

e. How much would you be willing to bribe your rival not to advertise?

Don't know this answer!

https://brainmass.com/economics/game-theory/nash-equilibrium-game-theory-321630

#### Solution Preview

a. Your dominant strategy is Advertise because regardless of your opponent's move, you will always do better with advertise, if your opponent chooses Don't, you get 10 from Ad and 2 from Don't, if your opponent ...

#### Solution Summary

Nash equilibrium and game theory is examined.