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9 Little Kona is a small coffee company that is considering entering a market dominated by Big Brew. Each company's profit depends on whether Little
9 Little Kona is a small coffee company that is considering entering a market dominated by Big Brew. Each company's profit depends on whether Little Kona enters and whether Big Brew sets a high price or a low price: Big Brew High price Low price . Brew makes . Brew makes $3 million $1 million Enter . Kona .Kona Little makes $2 million loses $1 million Kona . Brew makes . Brew makes $7 million $2 million Don't enter . Kona .Kona makes zero makes zero a Does either player in this game have a dominant strategy? b Does your answer to part (a) help you figure out what the other player should do? What is the Nash equilibrium? Is there only one? C Big Brew threatens Little Kona by saying, 'If you enter, we're going to set a low price, so you had better stay out.' Do you think Little Kona should believe the threat? Why or why not? d If the two firms could collude and agree on how to split the total profits, what outcome would they pick
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