Assume the Huawei and Xiaomi have a large inventory of mid-range smart phone that they

would like to sell before a new generation of faster, cheaper mid-range smart phone is

introduced. Assume that the question facing each competitor is whether or not they should

widely advertise a "discounted" sale on these discontinued items, or instead let excess

inventory work itself off over the next few months. If both aggressively promote their

products with a nationwide advertising campaign, each will earn profits of $6 million. F one

advertises while the other does not, the firm that advertises will earn $15 million, while the

one that does not advertise will earn $2 million. If neither advertises, both will earn $11

million. Assume this is a one-shot game, and both firms seek to maximize profits.

Xiaomi

Promotion Strategy Advertise Don't Advertise