Firms A and B must decide whether or not to adopt a new technology. The cost of
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Question:
Firms A and B must decide whether or not to adopt a new technology. The cost of adoption is 1000 for each firm. If they both invest, each will get profits of 100 from which the adoption cost must be deducted. If only one firm adopts, then it makes profits of 2000 from which the adoption cost must be deducted, whereas the competitor earns (-100). If neither firm adopts then both earn zero.
Design the payoff matrix and highlight every pure strategy Nash equilibrium of this game.
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