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Nash equilibrium The game tree below is for the exact same game as in problem 2 except we now assume that Firm 1 gets to

Nash equilibrium

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The game tree below is for the exact same game as in problem 2 except we now assume that Firm 1 gets to choose its effort rst and Firm 2 gets to choose its effort after seeing Firm 1's effort. Firm 1's expected reward is listed rst, followed by Firm 2's expected reward. a) If Firm 1 chooses Law, what should Firm 2 choose? (5 points) b) If Firm 1 chooses Medium, what should Firm 2 choose? (5 points) c) If Firm 1 chooses High, what should Firm 2 choose? (5 points) (:1) What is the backward induction Nash equilibrium for this game? (10 points) 800. 350 650. 400 400. 450 700, 200 625, 225 500, 250 600, 90 575, 100 250, 80 Expected Rewards: Firm 1, Firm 2

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