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FitScan and Actitrack are price-setting firms that produce digital fitness trackers at a marginal cost of 10. Let p denote the price of the FitsScan

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FitScan and Actitrack are price-setting firms that produce digital fitness trackers at a marginal cost of 10. Let p denote the price of the FitsScan tracker and po the price of the Actitrack tracker, which they set simultanously. Demand for FitScan digital fitness trackers is given by (1 = 350top2-p1, whereas demand for Actitrack digital fitness trackers is given by q2 = 350 + 8p1 - p2, where a, BE (0, 1). (a) FitScan launches an advertising campaign that costs 10, 000, which has the effect of raising o to 0.8, while / remains 0.5. Is this a good investment for FitScan? Would Actitrack object to the campaign? (b) Let a = 0.8 and / = 0.5 due to the campaign. FitScan proposes they coordinate to both set the price p that maximises industry profit. Is this an attractive proposition for Actitrack? Could collusion be sustained if the game between FitScan and Actitrack were infinitely repeated

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