a) Payoff table
Simultaneous one shot game
NE : (both firms advertise)
if both could collude, where if both could decide, not to advertise, each is better off , & gets 12
c) r = .35, the discount Factor d = 1/(1+r)
d = 1/1.35= .7407
then if both Cooperate, present value of cooperation Payoff
Vc = 12+12d + 12d2 + 12d3 + ....
if any one deviates, then cheater gets 52 this period, & punishment starts next period, where each gets 0 , the nash eqm payoff,
so present discount value PDV of cheating payoff
Vd = 52+ 0 + 0....
as Vc < Vd
then cooperation can't be sustained, firms can't do better.