A small tourist town has two Italian restaurants, Romano’s and Giardino’s. Normally both restaurants prosper with no advertising. Romano’s could take some of Giardino’s customers by running radio ads...

A small tourist town has two Italian restaurants, Romano’s and Giardino’s. Normally both restaurants prosper with no advertising. Romano’s could take some of Giardino’s customers by running radio ads and Giardino’s could do the same thing. The one-month profit matrix (showing payoffs in thousands of dollars) is

a. What is the Nash equilibrium in the static (one month) game?

b. Describe one or more possible Nash equilibria if the game is repeated indefinitely.

c. Are there multiple equilibria if the game is repeated indefinitely?