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GM and Chrysler both must decide whether to invest in a new process. Games 1 and 2 below show how their profits depend on the

GM and Chrysler both must decide whether to invest in a new process. Games 1 and 2 below show how their profits depend on the decision they might make.

GAME 1 GAME 2
Chrysler Chrysler
Invest

Don't

Invest

Invest

Don't

Invest

GM Invest

GM = 5

Chrysler= 5

GM=12

Chrysler=4

GM Invest

GM=12

Chrysler=4

GM =10

Crysler = 10

Don't Invest

GM=4

Chrysler=12

GM = 10Chrysler = 10

Don't

Invest

GM = 5Chrysler = 5

GM=4

Chrysler=12

a) (4) What is the Nash equilibrium from each game?

b) (6) Which of the games above (1, 2, both or neither) represents a prisoner's dilemma? Explain.

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