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Derive the mixed strategy equilibrium if both Intel and AMD act simultaneously in the game in the Managerial Solution. What is the expected profit of
Derive the mixed strategy equilibrium if both Intel and AMD act simultaneously in the game in the Managerial Solution. What is the expected profit of each firm? Intel and AMD, the dominant central processing unit manufacturers, decide whether to set their Intel advertising levels low or high. For now, suppose that they play this game once, act simultaneously, and their profits are symmetric. If both choose low levels of advertising, Intel's profit, 1, and AMD's profit, IA, are each 2. If both choose high, each earns 3. If Intel's Low High advertising is high and AMD's is low, 1 =9 and IA = 5. If Intel's advertising is low and AMD's is 52 59 high, 1 = 5 and XA = 9. Low Let the probability that a firm chooses low be a for Intel and p for AMD. If the firms choose their advertising independently, then of is the probability that both choose low advertising, $2 $5 (1 -)(1 - B) is the probability that both choose high advertising,
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