Don't use AI$=$Dislik$)$ In Extract A$,$ lines $15-16,$ it was suggested that some firms may respond to the advertising ban by cutting the prices of their products.

Using game theory and the information provided in Figure $1$ and Extract $A,$ discuss the effects on firms of cutting prices in an oligopolistic market $(12)$

Markets for food and drinks high in fat, salt or sugar $($HFSS$)$

Figure $1$: UK market share of potato crisps, $2017$

Extract A

The effects of a total ban on advertising of HFSS foods

Food and drinks which are high in fat, salt or sugar $($HFSS$)$ tend to be sold in highly concentrated markets. Tough new rules banning advertisements for HFSS products, such as those for confectionery, fizzy drinks and potato crisps. come into effect in July $2017$ as a means to reduce consumption. The rules apply to media targeted at under$-16$s and will mean a major reduction in the number of advertisements children see for HFSS products in posters near schools. in films targeted at children, on catch$-$up television and in social media if it is directed at children.

There are three main factors that will determine the effectiveness of the intervention: first whether advertising acts to expand the market share or steal rivals' market share. Secondly, how firms in the market adapt their behaviour in response to the ban. Thirdly, what substituteproducts do consumers turn to if they opted out of the targeted market.

Results from a recent survey in the UKsuggest that the total quantity of crisps sold would fall By around $15\%$ in the presence of an advertising ban, or by $10\%$ if firms respond with price cuts since the ban acts to make the market more competitive and firms respond to the ban by on average lowering theirprices.

The survey showed that following a ban. consumers are more likely to switch to another junk rood than fo ahealthy food. which $($in addition to the pricing response of firms$)$ acts to patially of set any health gains from the policy.