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QUESTION 13 The following extensive form game (i.e., tree) represents the sequence of decisions and possible outcomes for two firms in a cartel, Firm A

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QUESTION 13 The following extensive form game (i.e., tree) represents the sequence of decisions and possible outcomes for two firms in a cartel, Firm A and Firm B. Both firms can either decide to cooperate on a price fixing arrangement or cheat on a price fixing arrangement. Each potential combination of decisions presents the payoffs to these two firms. The first number represents Firm A's payoff and the second number is Firm B's. Cooperate 400, 400 Cooperate Cheat 300, 500 Firm A Firm B Cooperate Cheat 500, 300 Cheat 200, 200 What is the Nash equilibrium (or what are the Nash equilibria) of this game? Both firms will cooperate Both firms will cheat O Firm A will cooperate and Firm B will cheat Firm A will cheat and Firm B will cooperate None of the above

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