3.5 You are a manager of Firm A, which has a rival, Firm B. You are deciding...
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3.5 You are a manager of Firm A, which has a rival, Firm B. You are deciding whether to introduce a new product. If you do not introduce it, Firm B will introduce it. If you do introduce it, Firm B must decide whether to introduce it. If both firms introduce the product, each firm’s economic profit is $6 million. If only one firm introduces the product, that firm’s economic profit is $10 million, and the other firm’s economic profit is $0. If neither introduces it, both have $0 economic profit.
a. Draw the game tree for this game.
b. What is the Nash equilibrium of the game?
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