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I1 There are two firms that are in a price competition but also need to advertise in order to create the market for their product.
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There are two firms that are in a price competition but also need to advertise in order to create the market for their product. Simultaneously, each firm i e I = {1,2} chooses advertisement level a; E [0, 1] and price p; E [0, p] for some large p, and then each firm i sells amount of Qi = a1 + a2 - pi + bp; where o E (0, 1). The payoff of firm i p;Q, -ou,, where a > 0 is a known parameter. Write this formally as a game in normal form, and compute the sets of all Nash equilibria and all rationalizable strategiesStep by Step Solution
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