Problem
Netflix and Blockbuster each expects profit to rise by $100,000 in the coming year. Netflix, thinking that it would like its net profit to rise by more, considers advertising during the Super Bowl. An advertisement on the Super Bowl will cost $80,000. If Netflix advertises, and Blockbuster does not, it expects its profit to rise by $230,000 instead of $100,000, while Blockbuster's profit will rise by only $50,000. Netflix also knows that if it does not advertise, but Blockbuster does, its profit will rise by only $50,000 while Blockbuster's profit will rise by $230,000 instead of just $100,000. If both firms advertise, their profit will rise by the same as if neither had advertised, except each will have spent $80,000 for the ad.
a. Develop the payoff matrix for the decision facing Netflix and Blockbuster.
b. Is there a dominant strategy?
c. If so, what is it?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.