Magic Carpet and Golden Carpet are the only two companies specializing in carpet cleaning in your city. They have to decide between advertising or not advertising. If both companies choose to advertise, each will earn $20,000. If both choose not to advertise, each will win $15,000. If one chooses to advertise and the other chooses not to, the company that chooses to advertise will earn $18,000 and the other will earn $12,000.

Issue 1:

Suppose Magic Carpet is the first company to decide whether or not to advertise, and then Golden Carpet decides. Represent this situation as a decision tree.

Response files

Issue 2:

What is the result of this sequential game? Explain (6 points, including 4 for explanations)