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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
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 onemonth profit matrix (showing payoffs in thousands of dollars) is: W's Don 't Advertise Advertise 3 4 Don '! Advertise 3 0 Glardhlo's - 0 I Advertise 4 1 (a) Use best response analysis to find any pure strategies Nash equilibrium in the static (one month) game? (b) If the game is repeated indefinitely, can the use of titfortat strategies result in a Nash equilibrium? (c) Does the game have multiple equilibria if it is repeated indefinitely? (d) Would preplay communication have implications for the repeated game equilibrium? Please explain both in the static version of the game, and also if the game is repeated indefinately
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