Andy and John are playing the Galactic Crash game. The strategies and payoffs are given in the matrix below. Solve for all PURE AND MIXED strategy Nash equilibrium/ia. Andy/John Sun Moon Stars Sun 5,4 2,1 5,-8 Moon 1,2 4,5 1,-8 Stars -7,4 -7,1 0,-1 [5 marks] Martha is considering entering a market which is currently dominated by her rival Steve. If Martha does not enter she will make no profit and Steve will earn $5000. If Martha does enter then Steve can fight or accommodate her and Martha can observe his decision. If Steve fights Martha, Martha can Fight back resulting in a loss of $2000 for her and a loss of $1000 for Steve , or Exit the market resulting in a loss of $3000 for her and a profit of $1000 for Steve If Steve does not fight Martha, Martha can Compete aggressively resulting in no profit for her and a loss of $ 3000 for Steve or Cooperate with Steve, resulting in a profit of $1000 for her and $2000 for Steve There is no information asymmetry in this game. Draw a game tree to represent the strategic interaction above. Will you advise Martha to enter the market?

1. Andy and John are playing the Galactic Crash game. The strategies and payoffs are given in the matrix below. Solve for all PURE AND MIXED strategy Nash equilibrium/ia.

Andy/John	Sun	Moon	Stars
Sun	5,4	2,1	5,-8
Moon	1,2	4,5	1,-8
Stars	-7,4	-7,1	0,-1

[5 marks]

2. Martha is considering entering a market which is currently dominated by her rival Steve. If Martha does not enter she will make no profit and Steve will earn $5000. If Martha does enter then Steve can fight or accommodate her and Martha can observe his decision. If Steve fights Martha, Martha can

• Fight back resulting in a loss of $2000 for her and a loss of $1000 for Steve , or
• Exit the market resulting in a loss of $3000 for her and a profit of $1000 for Steve

If Steve does not fight Martha, Martha can

• Compete aggressively resulting in no profit for her and a loss of $ 3000 for Steve or
• Cooperate with Steve, resulting in a profit of $1000 for her and $2000 for Steve

There is no information asymmetry in this game.

1. Draw a game tree to represent the strategic interaction above.
2. Will you advise Martha to enter the market?