Suppose that the editors of Time and Newsweek are trying to decide upon their cover story for the
week. There were two major news developments: The leaking of a clandestine CIA officer's identify and
a terrorist suicide bombing. It is important that the news weeklies not choose the same cover story since
some readers will by only one magazine when they might otherwise buy both. The choice of cover story
depends on newsstand sales. The editors believe that 20 percent of newsstand buyers are interested in
the CIA story, while 80 percent are interested in the terrorist bombing. If both news weeklies run the
same cover story, they will evenly share the market, but if they run different cover stories, each will get
that share of the market. This static game is depicted in the following figure.
Payoff Matrix:
(row, column)=(Time, Newsweek)
CIA Terrorism
CIA (10,10) (20,80)
Terrorism (80, 20) (40,40)
1. Does Time have the dominate strategy?
2. Does Newsweek have the dominate strategy?
3. What is the Nash equilibrium for this game?