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Hunter and Melissa are two competing coffee growers who are exploring new markets to sell their product. There are two potential markets - Large
Hunter and Melissa are two competing coffee growers who are exploring new markets to sell their product. There are two potential markets - Large and Small - referred to as L and S hereafter. Entry costs are large so each of them can enter only one of the two markets. If one of them enters L while the other one enters S, then one who enters L gets 36, while the other one gets 9. If both enter L, each gets 360. If both enter S, each gets 9a. where 0 a (i) (2 points) The game described above has at least one Nash equilibrium in pure strategies irrespective of the value of a - Do you agree? (ii) (2 points) The game described above has at least one Nash equilibrium in strictly mixed strategies irrespective of the value of a - Do you agree? [Note: By strictly mixed strategies we refer to strategies of the form (xL + (1-x)S, yL+ (1 - y)S) where 0 < x < 1 and 0 < y < 1.]
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