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THE ANSWER IS NOT 36 OR 18. tHANK YOU !! Firm 1 and firm 2 are competing for franchise. The present value of the net

THE ANSWER IS NOT 36 OR 18. tHANK YOU !!

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Firm 1 and firm 2 are competing for franchise. The present value of the net revenues generated by the franchise are equal to 36. Each firm's probability of winning the franchise is given by its proportion of the total spent by the two firms on lobbying the local government committee that awards the franchise. That is, if I1 and I2 represent the lobbying expenditures offirms 'I and 2, respectively, then firm 1's probability of winning is given by l1/(l1 + I2), while firm 2's probability of winning is l2/(I1 + l2). If each firm assumes that the other firm's spending is independent of its own, what is the equilibrium level of spending for each firm? Instructions: Round you answers to the nearest penny (2 decimal places). Equilibrium for firm 1: $ Equilibrium for firm 2: $

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