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SalePros and DesignPros compete in the same market, using different strategies. SalePros has a product of fixed quality and either advertises or runs a discount
SalePros and DesignPros compete in the same market, using different strategies. SalePros has a product of fixed quality and either advertises or runs a discount campaign. DesignPros does not invest in marketing campaigns, but may sell a product that is premium or cheap. Suppose they move sequentially, as represented by the following game tree: Premium (0, 10) Advertise Cheap (30, 0) SP DP Premium (10, 10) Discount (25, 5) Cheap Derive the Nash equilibrium through backward induction. The Nash equilibrium is: O SP plays Advertise, DP plays Cheap. O SP plays Advertise, DP plays Premium. O SP plays Discount, DP plays Cheap. O SP plays Discount, DP plays Premium
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