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1. AIR, Inc. and RMS, Inc. are in competition. Each can follow one of two strategies, it can either cooperate, or compete. The payoff matrix, showing prots in millions of dollars, looks like this: AIR Cooperate Strategies Cooperate 40,3 0 Com - ete 80,10 (a) Identify any Nash equilibria in pure strategies to this game. Explain your reasons. (b) Prove that there does not exist a Nash equilibrium in mixed strategies different from the pure strategy Nash equilibrium you found in (a). In one sentence, provide an intuitive reason for these results. (c) If AIR acquired RMS, it could coordinate the two rms' strategies. (Assume there are no other advantages or disadvantages to the merger.) What is the maximum amount AIR would be willing to pay for EMS? What is the minimum amount RMS would require to be willing to be acquired? Suppose the entire supply of krypton in the world is controlled by 20 people, each owner possessing 10,000 grams of this powerful mineral. The world's demand for krypton is Q = 1000 1000p p is the price of krypton. (a) If all owners conspire to control the price of krypton, what is the price they set? What is the amount they are able to sell? (b) Why the price calculated in (a) is unstable