Business, 13.03.2020 22:09 kaziyahf2006

Two startups, Ultra and Soar, have develop fairly similar ridesharing apps and are competing for customers by deciding how much to advertise their app. Let Ai ≥ 0 be the advertising level of firm i. The profits of each firm depend on how much it advertises its app but also on the advertising level of its opponent A−i . The higher the advertising levels the more visibility ridesharing apps and demand increases. In particular, firm i’s profits are ui(Ai , A−i) = (90 + Ai + A−i)Ai − 2A2 i . Ultra chooses A1 first and, after observing it, Soar chooses A2.

(a) Draw the extensive form. Which are the proper subgames?
(b) Find the SPNE. How does it compare to the NE of the simultaneous move game?
(c) Is there a first-mover advantage in the market? Justify your answer

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Two startups, Ultra and Soar, have develop fairly similar ridesharing apps and are competing for cus...

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