Paper 3, Section II, 21H
State and prove the Lagrangian Sufficiency Theorem.
The manufacturers, and , of two competing soap powders must plan how to allocate their advertising resources ( and pounds respectively) among distinct geographical regions. If and denote, respectively, the resources allocated to area by and then the number of packets sold by and in area are
respectively, where is the total market in area , and are known constants. The difference between the amount sold by and is then
seeks to maximize this quantity, while seeks to minimize it.
(i) If knows 's allocation, how should choose ?
(ii) Determine the best strategies for and if each assumes the other will know its strategy and react optimally.
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