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.

A.What is the dominant strategy for each firm? Are these also secure strategies?

B. What is the Nash Equilibrium?

C. Would Collusion work in this case?