Suppose That Fizzy Soda and Townie Soda Must Choose Whether

Multiple Choice

Suppose that Fizzy Soda and Townie Soda must choose whether to advertise their soft drinks. In a Nash equilibrium, both firms choose to advertise and earn weekly profits of $80,000. Which of the following statements is (are) TRUE?
I. Neither firm has incentive to change its advertising strategy, given the strategy choice of its rival.
II. If Townie Soda decided to stop advertising, its profits would fall below $80,000.
III. If both firms stopped advertising, it is possible that each firm could earn profits greater than $80,000.

A) I
B) II and III
C) I, II, and III
D) I and II