### Extensive form of game and identify nash equilibrium

Assignment Help Macroeconomics
##### Reference no: EM1315944

Time Magazine and Newsweek are two competing news magazines. Suppose that each company charges the same \$5.00 price for their magazines. Each wants to maximize its sales given this price.  Each week there are two potential cover stories. One is on politics and the other is on the economy. Sales of both companies are affected by their choice of cover story, as detailed in the following table.

 Time Cover Newsweek Cover Time Sales (\'000s) Newsweek Sales (\'000s) Politics Politics 300 150 Politics Economy 700 200 Economy Economy 200 150 Economy Politics 400 700

Now suppose that Newsweek is able to choose its cover story first and announces its choice before Time chooses its cover.

i) Construct the extensive form of the game.

ii) What is the Nash equilibrium for this sequential game?

iii) Is there a first-mover advantage or a first-mover disadvantage in this game?

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