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Burger King and Wendy’s are engaging into the following one-shot game: if Burger King advertises and Wendy’s does not, Burger King will make $20 million in profits and Wendy’s will make $6 million. If Wendy’s advertises and Burger King does not, Burger King will make $2 million and Wendy’s will make $6 million. If Burger King advertises and Wendy’s advertises, each firm earns $10 million. If neither firm advertises, Wendy’s will make $8 million and Burger King will make $4 million.
(a) Write the payoff matrix for the above game.
(b) Does Burger King have a dominant strategy?
(c) Does Wendy’s have a dominant strategy?
(d) What is the Nash equilibrium for the one-shot game?
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