Two firms dominate the market for band-aids and compete with advertising. The following payoff table depicts the profit implications of their different advertising strategies.

a. Suppose firms make their decisions simultaneously and independently, in other words they cannot communicate with each other. What is the Nash equilibrium?

b. If the firms can communicate and coordinate before setting their advertising strategies, will the outcome be different? Explain.

Firm B's Ad spending Low Medium High Low 8, 11 6, 12 5, 14 Firm A's Ad Medium 12, 9 8, 10 6, 8 spending High 11, 6 10, 8 4, 6