Continuing with the advertising model, suppose the firms compete on price rather than quantity. That is, quantity demanded is given by Q = a - p, where p is the price consumers face. After firm 1's selection of the level of advertising, the firms simultaneously and independently select prices p1 and p2.
The firm with the lowest price obtains all of the market demand at this price. If the firms charge the same price, then the market demand is split equally between them. Find the subgame perfect equilibrium of this game and explain why firm 1 advertises at the level that you compute.