Please explain question b

Please explain question b

Please explain question b

Let us return to examining the competition occurring for the East India trade. a. Consider the game faced by the British and Dutch managers when both are given contracts that compensate them with 12 of 1% of revenue. The strategic form game is shown in Figure PR9.6. Find the Nash equilibria. Figure PR9.6 Revised East India Trade game Dutch Manager (Revenue-Maximizer) Low Moderate High British Manager Low 600, 600 550, 687.5 500, 750 (Revenue-Maximizer) Moderate 687.5, 550 625, 625 562.5, 675 High 750, 500 675, 562.5 600, 600 b. Now consider the game between the British and Dutch shareholders as to what kind of contracts to give their managers. Assume they simultaneously choose between a contract that gives the manager 1% of profit and one that gives him 1/2 of 1% of revenue. Assume, as before, that shareholders' payoff is profit (and we ignore the trivial amount that they pay to their managers). After a pair of contracts are selected, they are revealed to both managers and the managers then choose between supply levels of low, moderate, and high. Find all subgame perfect Nash equilibria