N5

Adam is the lone chain restaurant operating in a shopping mall, and Charlie is thinking about whether or not to open a full one. Currently Charlie only has a take-out window and earns $200,000 in profits. Adam can choose whether or not to invest in food assembly kitchen upgrades (such an investment by Adam will lower Charlie's current take-out window profit by $100,000. Adam's investment also means Charlie's profits will still be just $200,000 even if he opens a full restaurant, Without the investment, Adam earns $500,000 if Charlie doesn't enter and $300,000 if Charlie does enter the full restaurant market. If Adam does invest, his profits are $100,000 and if Charlie enters, and $800,000 if Charlie doesn't enter.

a, Represent the game in normal form. Label the rows and column players, strategies of each and their payoffs (in $100,000s)

b, Does each player have a dominate strategy? What is the strategy

c, What is the Nash Equilibrium in this game?