In the political campaign advertising game in Section 1.B, party L chooses an advertising budget, x (millions of dollars), and party R similarly chooses an advertising budget, y (millions of dollars). We showed there that the best-response rules in that game are for party R and
for party L.
(a) What is party R’s best response if party L spends $16 million?
(b) Use the specified best-response rules to verify that the Nash equilibrium advertising budgets are x 5 y 5 25, or $25 million.
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