Illustrate what is cooperative solution to this game

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Reference no: EM1371182

Q. Philip Morris and R.J. Reynolds spend huge sums of money each year to advertise their tobacco products in an attempt to steal customers from each or. Suppose each year Philip Morris and R.J. Reynolds have to decide where or not y want to spend money on advertising. If neither firm advertises, each will earn a profit of $2 million. If y both advertises, each will earn a profit of $1.5 million. If one firm advertises and or does not, firm that advertises will earn a profit of $2.8 million and or firm will earn $1 million.

a. Use a payoff matrix to depict this problem.

b. Suppose Philip Morris and R.J. Reynolds can write an enforceable contract about illustrate what y will do. Illustrate what is cooperative solution to this game?

c. Illustrate what is Nash equilibrium without an enforceable contract? Explain why this is likely outcome

Reference no: EM1371182

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