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Business Strategy
Assume that two interior design companies, Alistair and Baine, are competing for customers and, if they both advertise, they would each earn $30 million in profits. If neither advertises, they each earn $50 million in profits. If one advertises and the other doesn't, the firm that advertises earns $40 million in profit while the other earns $20 million in profit.
1. Present the information above in the form of a payoff matrix. Let Baine be the row player and Alistair the column player.
2. Define Nash equilibrium. What is {are} the Nash equilibriumls} in this game. Explain.
3. Define dominant strategy. Is there a dominant strategy for Baine and, if so, what is it? Explain.
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