Please show and explain you work.
Firm 2
Don’t Expand
Small Expansion
Large Expansion
Firm 1
Don’t Expand
18,18
15,20
9,18
Small Expansion
20,15
16,16
8,12
Large Expansion
18,9
12,8
0,0
There are two firms that are considering the effect on their
profits of expanding their capacity. Their choices are no
expansion, a small capacity expansion, and a large capacity
expansion. Expansion of capacity would allow a firm to obtain a
larger market share, but it would also put downward...