Solving a Game when Players Are Rational

Solving a Game when Players Are Rational 63

Solving a Game when Players Are Rational
Solving a Game when Players Are Rational

TABLE 3.2 SPENDING 15 IS A DOMINANT STRATEGY FOR PM

RJR PM Payoff PM Payoff PM Payoff Strategy from 15 from 10 from 5

Spend 5 60 > 57 > 45

Spend 10 45 > 40 > 28

Spend 15 35 > 30 > 20

FIGURE 3.5 Cigarette Advertising Game When TV and Radio Commercials Are Excluded

45,45 28,57

57,28 40,40 Philip Morris

R. J. Reynolds

Spend 5

Spend 10

Spend 5 Spend 10

Of course, there’s nothing wrong with that if that is indeed what happened, since the objective of the ban was to reduce smoking, not lower companies’ profits.

A rational player never smokes cigarettes. (Okay, I’m making that one up.)

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