For years the bakery Ceres has been the only one in the village of Rosslare. Business has been going very well. But these days may soon be over as the Duchateau family is considering entering the bakery market in Rosslare with its bakery "Arn Blasta". If Ceres is a monopolist its profits are equal to 100K. If Arn Blasta enters the market and both firms charge 'high' prices, both bakeries will earn 50K. If, on the other hand, Ceres sets a 'cut- throat' competitive price (low price), and Arn Blasta sets the high price, then Ceres' profits are equal to OK, while Arn Blasta's profits are -10K, and vice versa. If both bakeries set the low price, their profits are -5K. a. Assume first that the timing is as follows: if Arn Blasta enters then Ceres sets its price (high or low), after which Arn Blasta sets its price. Draw the game tree for this situation and determine the payoffs at the final nodes. Is it a game of perfect information? b. Use backward induction to solve the game. c. Now assume that in the event Arn Blasta enters, the two bakeries set their prices (high or low) simultane- ously. Draw the game tree for this situation and determine the payoffs at the final nodes. Is it a game of perfect information? Ceres is looking for ways to prevent entry. An advertising company offers the following contract: if Arn Blasta enters it prints and distributes flyers that guarantee consumers a low price at Ceres. The cost of the advertising contract is 30K. The game is thus altered in the following way: Before Arn Blasta makes its decision to enter, Ceres must decide whether to sign the contract with the ad company. Pricing happens sequentially in the case of entry. d. Draw the game tree for this situation and determine the payoffs at the final nodes. e. Use backward induction to solve the game. Will Ceres accept the advertising Company's offer? f. What is the highest price the advertising company can charge Ceres for its ad campaign?