Consider two firms, Firm A and Firm B, that are engaged in illegal price fixing. While this price fixing has netted both firms a great deal in profits, the Department of Justice eventually catches on and brings the CEOs of both firms in for an interrogation.

In their interrogations, both CEOs have the option of confessing to price fixing or holding out. The following payoff matrix summarizes their total profits under each combination of decisions, with the first number in each cell indicating Firm A's payoff and the second number in each cell denoting Firm B's payoff.

Firm B

Confess Hold Out

Firm A: Confess 5,5 10,0

Hold Out 0,10 8,8

Answer the following questions:

1. (7 points)What is/are the Nashequilibrium/equilibriaofthis game (if any), assuming that both firms choose their actions simultaneously?
2. (7 points) Suppose now that the Department of Justice first interrogates Firm A. Afterwards they will announce Firm A's decision and then the Department of Justice will interrogate Firm B. What is/are the Nash equilibrium/equilibria(if any) of this sequential game?
3. (7 points) Now suppose that Firm A gains exclusive access to a team of lawyers that increases their payoff by 6 if they hold out. Would this affect the outcome of thegame played in part a.?If so, how? Explain your answer.