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i 2 of 2 ZOOM 4. Assume that two clothing manufacturers, Danier and L.L. Bean, market their goods strictly by mail order. Each produces an essentially identical field coat. The cost of producing such a coat is exactly $100. Because the field coats are perfect substitutes, customers will flock to the seller that offers the lowest price. If both firms offer identical prices, each receives half the customers. For simplicity, assume that the two firms have the choice of pricing at whole-dollar prices of $103, $102, or $101. Market demand at $103 is 100 coats; at $102, 110 coats; and at $101, 120 coats. a) Create the payoff matrix, the profit each firm would earn at various prices. b) What is the equilibrium outcome of the game Danier and L.L. Bean are playing? 5. Consider two co-workers, Dean and Richard. They are writing a report together, and often email each other with new pages they have written. Dean prefers to use Word and Richard prefers Word Perfect. Richard Dean A orcyp effect Richard Wordp effect D (2,1) E (-2,-2) F (-2,-2) G (1,2) a) b) If Dean writes the first draft, what will the Subgame perfect Nash Equilibrium be? Is there a first mover advantage?