8. Firm 1 and firm 2 are automobile producers. Each has the option of producing either a big car or a small car. The payoffs to each of the four possible combinations of choices are as given in the following payoff matrix. Each firm must make its choice without knowing what the other has chosen.

a. Does either firm have a dominant strategy?

b. There are two Nash equilibria for this game. Identify them.

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Big car Big car II, = 400 II = 400 Firm I Small car II, = 800 II = 1000 = Firm 2 Small Car II, = 1000 II, => 500 II = 800 II = 500