Question

The following payoff matrix depicts two companies, Lowe's and Home Depot, in an advertising game. The companies will be playing the same game several times. Each company makes its decision without knowing what the other chooses. The payoffs for each firm represent economic profits.



Imagine that at the beginning of each week, Home Depot and Lowe's play the game described in the payoff matrix above. Assume there is no known end to the game, so Home Depot and Lowe's will effectively be playing an infinite number of rounds. The possible payoffs are the same in all rounds played.
 
In the first week, neither Home Depot nor Lowe's offered a coupon, and each earned $150 million. In the second week, Home Depot offered a 10% off coupon and Lowe's did not offer a coupon. From the third round onward, assume that both players will play a strict tit-for-tat strategy.
 
In the third week, Home Depot earns a profit of 

 and Lowe's earns a profit of 

 .

In the fourth week, Home Depot earns a profit of 

 and Lowe's earns a profit of 

 .

Answer 1