Question: Consider the model of advertising and Cournot competition analyzed in this chapter. Suppose the two firms could write an externally enforced contract that specifies an

Consider the model of advertising and Cournot competition analyzed in this chapter. Suppose the two firms could write an externally enforced contract that specifies an advertising level a and a monetary transfer m from firm 2 to firm 1. Would the firms write a contract that specifies a = 3? If not, to what level of advertising would they commit?

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