Industry wide agreement concerning the extent of advertising

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Firms M and N compeer for a market and must independently decide how much to advertise. Each can spend either 10 million or 20 million on advertising. if the firms spend equal amounts, they split the 120 million market equally. if one firm spend 20 million and the other 10 million the former claims two thirds of the market and the latter one third. What is the payoff table? If the firms act independently what advertising level should each choose? Could the firms profit by entering into an industry wide agreement concerning the extent of advertising?

Reference no: EM13798244

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