Question: 1. (5 points) Assume that this is a simultaneous move one shot game, i.e., each player moves simultaneously, and the game is played once. Two

1. (5 points) Assume that this is a simultaneous move one shot game, i.e., each player moves simultaneously, and the game is played once. Two firms compete by advertising, and you are given the profit matrix for the advertising game. The numbers in the table show the profit for each firm from each outcome Firm 2 Do Not Advertise Advertise 0 Do Not Advertise 2 0 Firm 1 Advertise 2 W (a) What is each firm's best response to its rival's possible actions? (i) If Firm 1 does not advertise what is Firm 2's best action? (ii) If Firm 1 advertises what is Firm2's best action? (iii) If Firm 2 does not advertise what is Firm 1's best action? (iv) If Firm 2 advertises what is Firm I's best action? (b) What is Firm l's dominant strategy (if they have one)? (c) What is Firm 2's dominant strategy (if they have one)

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