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Suppose that Pentax and Leica are the only camera makers that can invest in a new technology that would revolutionise the industry. The following matrix
Suppose that Pentax and Leica are the only camera makers that can invest in a new technology that would revolutionise the industry. The following matrix shows the payoffs in millions of euros from investing in this technology:
Leica
I Pentax Invest Do Not Invest
tableInvest,Do Not InvestDo Not Invest,
a If both firms move simultaneously, does either firm have a dominant strategy? Explain.
b What is the Nash equilibrium of both firms move simultaneously?
c The German governments commits to paying Leica a lumpsum subsidy of million euro if it invests in this technology. What is the Nash equilibrium?
d If Leica does not receive a subsidy but has a technical advantage over Pentax concerning this technology and has a head start ie moves first what is the Nash equilibrium?
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