Table 113 Firm A(Alistair's)and Firm B (Baine's)are the Only Firms

Multiple Choice

Table 11.3 Firm A(Alistair's) and Firm B (Baine's) are the only firms selling luggage in the upscale town of Adelaide.Each firm must decide on whether to increase its advertising spending to compete for customers.If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit.Table 11.3 shows the payoff matrix for this advertising game.
-Refer to Table 11.3.If Alistair assumes that Baine would increase its advertising budget, what should it do?

A) Alistair should keep its own budget the same and allow Baine to incur the higher cost.
B) Alistair should also increase its advertising spending.
C) Alistair should reduce its advertising spending.
D) Being a duopolist, Alistair is not affected by Baine's choices because it has a secure 50 per cent market share.