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Question 5 Two firms are deciding whether or not to enter a market. Their payoffs are...
Question 5 Two firms are deciding whether or not to enter a market. Their payoffs are as follows: • If both firms enter the market, Firm A gets $100 million and Firm B gets $75 million. • If neither firm enters, Firm A gets $130 million and Firm B gets $125. • If Firm A enters and Firm B doesn’t, Firm A gets $70 million and Firm B gets $0. • If Firm B enters and Firm A doesn’t, Firm A gets $10 million and Firm B gets $15 million.
a. (5 points) Write out the payoff matrix described above.
b. (5 points) Does Firm A or Firm B have a dominant strategy? If so, what is it?
c. (10 points) What are the two Nash Equilibria? Justify your answer using the definition.
Solutions
i
hope this would help you thank you !
Rahul Sunny answered 2 years agoRelated Solutions
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Firm 1
_____________________________________________________________________________________
Price
High
Price
Low
Firm
2
Price
High
200.
200
50,
300
Price
Low
300,
50
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