Negative Ad Campaigns: Each one of two political parties can choose to buy time on commercial… 1 answer below »

Negative Ad Campaigns: Each one of two political parties can choose to buy time on commercial radio shows to broadcast negative ad campaigns against its rival. These choices are made simultaneously. Government regulations forbid a party from buying more than 2 hours of negative campaign time, so that each party cannot choose an amount of negative campaigning above 2 hours. Given a pair of choices (a1, a2), the payoff of party i is given by the following function: vi(a1, a2) = ai − 2aj + aiaj − (ai)2.

a. What is the normal-form representation of this game?

b. What is the best-response function for each party?

c. What is the pure-strategy Nash equilibrium? Is it unique?

d. If the parties could sign a binding agreement on how much to campaign, what levels would they choose?