Two competing firms producing parts and components for spacecrafts, Firm 1 and Firm 2, are currently deciding whether to enter the market and establish a plant in a specific city. In this city, there is only one main producer of spacecrafts to which the firms could sell their final product. The matrix below shows the payoffs for entering and not entering the market.

1. What is the optimal strategy for each firm?
2. Assume that you are such as the local government in the city. How could you alter the incentives (payoffs) with a prize to ensure that at least one firm enters the market?

	Firm 2
	Enter	Don't Enter
Enter	-1, -2	4, 0
Firm 1
Don't Enter	0, 4	0, 0