(Table: Nike and Reebok Advertising Game) Use Table: Nike and Reebok

Multiple Choice

(Table: Nike and Reebok Advertising Game) Use Table: Nike and Reebok Advertising Game. The sneaker industry is dominated by Nike and Reebok, and each firm spends a lot of money on advertising. Suppose each firm is considering a costly television commercial during the World Series. The table shows the payoff matrix of profits that each firm would receive from its advertising decision, given the advertising decision of its rival. Profits in each cell of the payoff matrix are given as (Nike, Reebok) . If both firms expect to play this game repeatedly (every year for the foreseeable future) , and each follows a Grim trigger strategy, then in equilibrium, Nike _____ and Reebok _____.
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A) advertises; does not advertise
B) does not advertise; advertises
C) does not advertise; does not advertise
D) advertises; advertises