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Economists often use Game Theory to analyze the actions of oligopolists. Suppose that Toyota and GM are considering entering a new market for electric automobiles
Economists often use Game Theory to analyze the actions of oligopolists. Suppose that Toyota and GM are considering entering a new market for electric automobiles and that their profits (in millions of dollars) from entering or staying out of the market are: GM Enter Do Not Enter Enter 10, -40 250, 0 TOYOTA Do Not Enter 0, 150 0,0 a) Does Toyota have a dominant strategy? EXPLAIN b) Does GM have a dominant strategy? EXPLAIN. c) What is the Nash Equilibrium? d) Suppose the U. S. Government is interested in affecting the outcome in this market. How would your answer change (if at all) if the US Government committed to paying GM a lump-sum subsidy of $50 million on the condition that it would produce this new type of car? EXPLAIN
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