Suppose that each of two firms has the independent choice of advertising its product or not advertising. If neither advertises, each gets $10 million in profit; if both advertise, their profits will be $5 million each; and if one advertises while the other does not, the advertiser gets $15 million profit while the other gets $2 million profit. according to game theory the nash equilibrium is

Question

Trey Clayton

Business

18 October, 04:34

Suppose that each of two firms has the independent choice of advertising its product or not advertising. If neither advertises, each gets $10 million in profit; if both advertise, their profits will be $5 million each; and if one advertises while the other does not, the advertiser gets $15 million profit while the other gets $2 million profit. according to game theory the nash equilibrium is

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Elliot Mcbride · Answer 1

Answer: The Nash equilibrium is a situation where individuals or players have no incentive to change their strategy taking into account the strategy of their opponents.

So in this case the nash equilibrium is "both advertise" The best equilibrium would be not to advertise any of the 2 but taking into account the attempt of what the opponent can do the nash equilibrium is where both advertise.