Philip Morris and RJ Reynolds Spend huge sums of money each year to advertise their tobacco products

Philip Morris and RJ Reynolds Spend huge sums of money each year to advertise their tobacco products to steal customers from each other. Suppose each year Philip Morris and RJ Reynolds must decide whether they want to spend money on advertising. If neither firm advertises, each will earn a profit of $2 million. If they both advertise, each will earn a pro profit of $2.8 million and the other firm will earn $1 milli $1.5 million. If one firm advertises and the other does not, the firm that does will earn a on. a. Use a payoff matrix to depict matrix to depict this problem. (10 points) b. What is the final outcome in this example. (2 points) You should use your own paper to draw and write down your answer. Send me an email with your answer. Your answer must include a drawing of the payoff matrix and the answer for letter b.

 

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