1)The following payoff matrix shows the resulting profits to firm 1 and to firm 2 from producingtwo alternative cereals (crispy or sweet):

Firm 2

Sweet

Crispy

Firm 1

Sweet

50, 40

60, 45

Crispy

55, 55

15, 20

a.(5 pts) Find out the Nash equilibria in the game? How many are there?

b.(5 pts) Suppose that Firm 1 moves first, what will the outcome be? Now suppose that Firm 2 moves first, what will the outcome be?

c.(5 pts) Moving first is costly, you need to spend money to go to the market first. Now consider a two-stage game in which, first, each firm decides how much money to spend to move first, and, second, it announces which product (Sweet or Crispy) it will produce. Which firm will spend more to go to the market first? How much will it spend? Should the other firm spend any money to go to the market first? Explain.

5) The following payoff matrix shows the resulting profits to firm 1 and to firm 2 from producing two alternative cereals (crispy or sweet): Firm 2 Sweet Crispy Sweet 50, 40 60, 45 Firm 1 Crispy 55, 55 15, 20 a. (5 pts) Find out the Nash equilibria in the game? How many are there? b (5 pts) Suppose that Firm 1 moves first, what will the outcome be? Now suppose that Firm 2 moves first, what will the outcome be? C. (5 pts) Moving first is costly, you need to spend money to go to the market first. Now consider a two-stage game in which, first, each firm decides how much money to spend to move first, and, second, it announces which product (Sweet or Crispy) it will produce. Which firm will spend more to go to the market first? How much will it spend? Should the other firm spend any money to go to the market first? Explain