Consider the following game. In the first stage, firm 1 decides how much to advertise a(alpha). In the second stage, firm 1 decides how much to produce given their advertising choice. In the third stage, firm 2 observes firm 1Ac€?cs production and advertisement decisions and then decides how much to produce.
Market inverse demand: P(Q)= a(alpha) – q
Firm 1Ac€?cs cost function: c1(q1,a(alpha))=a(alpha)^3/192
Firm 2Ac€?cs cost function: c2(q2)=0
i. Does this game have perfect or imperfect information? Explain. ii. Find all SPNE of this game and what are the profits to each firm for each SPNE you found.