Determine the optimal strategy for the situation by representing it as a game and finding the saddle point. State your final answer in the terms of the original question. A Republican and a Democratic candidate are running for office in a heavily Republican county. A recent newspaper poll comparing their views on taxes and welfare reform showed that when compared on taxes or on welfare reform, the Republican leads by 25%. When comparing the Democrat on welfare reform to the Republican on taxes, the Republican leads by 35%. But when comparing the Democrat on taxes to the Republican on welfare reform, the Republican leads by only 15%. Use this information to decide what each candidate should discuss at their next debate. (Let T represent taxes and W represent welfare reform.) {E W Republican T The saddle point is the Democrat % % W in row What should each discuss at their next debate? % % and column They both should discuss taxes at their next debate. The democratic candidate should discuss taxes, while the republican candidate discusses welfare reform. They both should discuss welfare reform at their next debate. The democratic candidate should discuss welfare reform, while the republican candidate discusses taxes. 2. Pepkoe's Competitiveness Pepkoe sells its popular soft-drink in Japan which competes head-on with Suzukos's Japanese version of the soft-drink. In early 2005, when the exchange rate was 110 JPY/$, Pepkoe's price was $2 per bottle, while Suzukoe's price was 200 JPY per bottle. By late 2005, the exchange rate had moved to 120 JPY/ $, but neither Pepkoe, nor Suzukoe, had changed their prices for their soft-drinks. i) What has been the impact on Pepkoe's competitiveness in the US market if Suzukoe is selling also in the US market? What has been the impact on the relative purchasing power of the Japanese consumer of soft-drinks? Note: Show work and formulae used in great details ii) 8) (20 pts.) Corrupted by their power, the judges running the popular game show Americas Next Top Scientist have been taking bribes from many of the contestants. Each episode, a given contestant is either allowed to stay on the show or is kicked off. If the contestant has been bribing the judges she will be allowed to stay with probability 1. If the contestant has not been bribing the judges, she will be allowed to staywith probability 1/3. Suppose that 1/4 of the contestants have been bribing the judges. The same contestants bribe the judges in both rounds, i.e., if a contestant bribes them in the first round, she bribes them in the second round too (and vice versa). (a) If you pick a random contestant who was allowed to stay during the first episode, what is the probability that she was bribing the judges? (b) If you pick a random contestant, what is the probability that she is allowed to stay during both of the first two episodes? (c) If you pick random contestant who was allowed to stay during the first episode, what is the probability that she gets kicked off during the second episode?