assume the huawei and xiaomi have a large inventory of mid-range smart phone that they would like to sell before a new generation of faster, cheaper mid-range smart phone is introduced. assume that the question facing each competitor is whether or not they should widely advertise a “discounted” sale on these discontinued items, or instead let excess inventory work itself off over the next few months. if both aggressively promote their products with a nationwide advertising campaign, each will earn profits of $6 million. f one advertises while the other does not, the firm that advertises will earn $15 million, while the one that does not advertise will earn $2 million. if neither advertises, both will earn $11 million. assume this is a one-shot game, and both firms seek to maximize profits. xiaomi promotion strategy advertise don’t advertise huawei advertise $ 6 million $ 6 million $ 15 million $ 2 million don’t advertise $ 2 million $ 15 million $ 11 million $ 11 million a. what is the dominant strategy for each firm? are these also secure strategies? b. what is the nash equilibrium? c. would collusion work in this case?

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a Both firms have advertise as their dominant strategy Xiaomi Dominant strategy is advertise We consider the first strategy Huawei that is to advertis... View the full answer