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1. Design a simple two-company game that illustrates why it might have been in the economic interests of the cigarette companies to support the ban.

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1. Design a simple two-company game that illustrates why it might have been in the economic interests of the cigarette companies to support the ban. In designing the game, assume that there is no regula- tion and that the two firms simultaneously choose between advertising and not advertising. Display your hypothetical payoffs in strategic form (see Figure 9.1) and highlight the Nash equilibrium. Explain the intuition for why the firms in your example would favor regulation to ban advertising. 2. Can you conclude from your example that all firms in all industries will favor bans on television advertising? Explain. Can you ever envision a situation where one firm might favor the ban and a competing firm might be against it? Discuss

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