Question: Grocery Outlet (G) and Savemart (S) are two rival grocery stores. Each is planning its advertising strategy for the upcoming month. While higher levels of advertising increase sales, they also raise costs, and ads are most effective if they are not counterbalanced by rival store's ads.
a. Does either player have a dominant strategy?
b. Does this game have a Nash equilibrium? If so, what are the strategies and payoffs to each player?
c. If the stores cooperated, what strategy would be optimal? Is this a Nash equilibrium point?