1. According to Wikipedia, arms race "occurs when two or more nations participate in interactive or competitive increases in 'persons under arms' as well as 'war material.' Simply defined as a competition between two or more states to have superior armed forces; a competition concerning production of weapons, the growth of a military, and the aim of superior military technology." Your goal is to build a game theoretic model that predicts an arms race with probability one. Start from the following simplification: Two countries simultaneously and independently decide whether or not to invest in a new weapons program. That is, the possible actions are Build (B) or Not (N). Their payoffs (?1, ?2) depend on their actions as follows:

Country 2 B N B -C, -C M - C, -D Country 1 N -D, M - C 0,0