Tesla, the electric car maker, has experienced a fantastic year in 2020, with excellent prof- itability and stock market performance. The electric (and soon self-driving) car business seems so premising that Apple is planning investments to enter the market for electric cars too. They are deciding on the production scale. Naturally, Tesla is ready to respond and must decide between two pricing structures: setting a high price (\"acconnnodate\") or starting a price war. The payoffs (in billions of dollars) for both companies are shown in the following payoff matrix: Tesla Accommodate Price War Enter on Small Scale Apple Enter on Large Scale 16 5 Here, Apple's payoffs are in the lower left of each box, Tesla's payoffs are in the upper right. The payoffs represent the prots to each player. (a) If both rms move simultaneously, does either rm have a dominant strategy? Explain. (b) Is there a pure strategy Nash equilibrium given that both rms move simultaneously? If so, what is Apple's prot in the equilibrium outcome? (c) If Apple has a head start over Tesla (meaning they get to make their decision rst), what is the new Nash equilibrium in this sequential move game? What is Apple's prot in the equilibrium? Draw a decision tree to show your argument. (d) Suppose now that during a cocktail party, a friend who studied at NYU Stern tells Tim Cook (Apple's CEO) that the company can strictly improve its situation relative to part (b) by not entering the car market and instead choosing to run advertisements critical of Tesla's new cars (\"bash\" the product). This adds a third possible strategy for Apple, but unfortunately Tim doesn't know all the potential payoffs he's no Steve Jobs. The new matrix is depicted below. What values can the unknown parameters a: and y take for the friend's advice to be correct? Here, Apple and Tesla move simultaneously. Tesla Accommodating Price War 70 40 Enter on Small Scale 15 35 Enter on Large Scale 16 5 Apple Bash New Product