Leo and Jerry are kids with entrepreneurial minds. They compete for customers by selling nearly

identical homemade lemonade in front of a solitary shopping center. Both boys can either work

hard or slack off. The following outcomes are possible:

$1)$ Both work hard and get $80$;

$2)$ Both slack off and get $40$;

$3)$ One works hard and gets $90,$ while the other slacks off and gets $20.$

Since they are kids, however, the making of lemonade comes with a very expensive trial and

error method, and the waste of lemons is high. Leo$$s costs are $95,$ while Jerry$$s are an

astounding $285.$ The costs are taken out of Leo and Jerry$$s revenues. Assuming that the boys

compete in a one$-$shot simultaneous game, and they do not face costs other than those which

arise out of their disastrous treatment of lemons, what will be the equilibrium outcome?

Answers:

a$)$ Both slack off;

b$)$ Both work hard;

c$)$ Leo works hard, Jerry slacks off;

d$)$ Leo slacks off, Jerry works hard

e$)$ There is no pure strategy equilibrium

f$)$ There are multiple pure strategy equilibria