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Question 6: Consider trade relations between Canada and Mexico. Assume that the leaders of the 2 countries believe the payoffs to alternative trade policies are

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Question 6: Consider trade relations between Canada and Mexico. Assume that the leaders of the 2 countries believe the payoffs to alternative trade policies are as follows: Canada's Decision Low Tariffs High Tariffs Canada gains: Canada gains: Low $25 billion $30 billion Tariffs Mexico's decision Mexico gains: Mexico gains: $25 billion $10 billion High Canada gains: Canada gains: Tariffs $10 billion_ $20 billion Mexico gains: Mexico gains: $30 billion $20 billion a) What set (combination) of strategies would maximize the income of the 2 countries as a whole? (2 points) b) Is there a dominant strategy for Canada? If yes, indicate what this strategy is. (2 points) c) Is there a dominant strategy for Mexico? If yes, indicate what this strategy is. (2 points) d) Is there a Nash Equilibrium in this game? If yes, indicate the Nash equilibrium for trade policy. (2 points)

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