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6. Two firms in a local market compete in the manufacture of household appliances. Each firm must decide if it will offer a warranty or
6. Two firms in a local market compete in the manufacture of household appliances. Each firm must decide if it will offer a warranty or not. The payoff of each firm's strategy is a function of their competitor as well. The pay-off matrix is presented below. Firm 2 warranty no warranty warranty 5,5 10,1 Firm 1 no warranty 1,10 15,15 (a) Does each firm have a dominant strategy? Explain your answer. (b) Find all the pure strategy Nash equilibrium and the mixed strategy Nash equilibrium (if any). (c) If firm 1 makes the decision first and firm 2 follows after observing the decision of firm 1, what is the Nash equilibrium? Compare it to your answer in (b), are the two firms better off if they move sequentially and why
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