2.Game Theory:There are two hospitals in a local market, Ascension Hospital and Acadiana Hospital.Neither hospital has a specialized pediatric cancer unit, and they can obtain this uniteitherby building onto their existing facilities or by merging with the big hospital in the area, Jackson Hospital, which currently does have a pediatric unit.Each hospital must decide whether to build onto their existing facilities or to merge with Jackson hospital. Assume a hospital would not build if they chose to merge with Jackson hospital.

Two possible strategies: Build onto the existing hospital or merge with Jackson hospital.

The payoff matrix below shows the total profit (in thousands) for each hospital resulting from the four combinations of strategies, two years after the decisions have been made.

Ascension Hospital

Merge

Build

Acadiana Hospital

Merge

Acadiana: $850

Ascension: $850

Acadiana: $550 Ascension: $1,100

Build

Acadiana: $1,100 Ascension: $550

Acadiana: $650 Ascension: $650

a)If Ascension Hospital merges with Jackson Hospital and Acadiana builds onto their existing facilities, the profits of Ascension Hospital will be __________ and the profits of Acadiana Hospital will be ______________.

b)The combined profits of the two hospitals are highest if Ascension hospital__________ and Acadiana Hospital ______________.

c)Does Acadiana hospital have a dominant strategy? If so, what is it?

d)In this game, whatNash Equilibrium result will be predictedaccording to the rulesof game theory?That is, based on game theory Acadiana Hospital will choose to _________ and Ascension Hospital will choose to ____________.

e)Are these hospitals caught in a Prisoner's Dilemma? Why or why not?