A small tourist town has two Italian restaurants, Romano€™s and Giardino€™s. Normally both restaurants prosper with no advertising. Romano€™s could take some of Giardino€™s customers by running radio ads and Giardino€™s could do the same thing. The one- month profit matrix (showing payoffs in thousands of dollars) is:

a. What is the Nash equilibrium in the static (one-month) game?
b. If the game is repeated indefinitely, can the use of tit-for-tat strategies result in a Nash equilibrium?
c. Does the game have multiple equilibria if it is repeated indefinitely?
d. Would pre-play communication (Chapter) or the Pareto criterion (Chapter) have implications for the repeated gameequilibrium?

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Romano's Don't Advertise Advertise Don't Advertise 0 Glardino's Advertise 4