Firms Homer and Deco are the manufacturers of electrical appliances. They have to decide whether to produce appliances requiring 120-volt or 90-volt outlets. If each firm produces appliances requiring 120-volt outlets, each firm will earn a profit of $100. Similarly, if each firm produces appliances requiring 90-volt outlets, each will earn $100. However if the two firms produce appliances requiring different types of outlets, each firm will earn $10 due to low demand from consumers who need to spend a lot of money in wiring the apartment to accommodate appliances using different outlets. You are hired as a manager of Homer.

a. (10 marks) Using the given information, what would be your choice(s)? Explain you answer using a table showing the profits of two companies given different strategies. (The formal name of this table is "normal-form game" which indicates the players in the game, the possible strategies of the players, and the payoffs to the players that will result from different strategies).

b. (4 marks) If you and the manager of Deco agree to produce 90-volt appliance, do you think she has an incentive to cheat on the agreement? Explain.

c. (5 marks) Now the engineers discover that production of 90-volt appliances not that safe and not so cost efficient when compared with the production of 120-volt appliances. As a firm produces appliances requiring 90-volt outlets, each will earn $90 instead of $100. Each firm which produces appliances requiring 120- volt outlets still earns $100. Assume that the rewards for other different strategies remain the same. Will you change your answer to (a)? Explain.

d. (6 marks) Based on your answer to (c), do you agree that the "best product may not always win"? If yes, why would this happen? If no, why not?