Two computer firms, A and B, are planning to market network systems for office information management. Each firm can develop either a fast, high-quality system (High), or a slower, low-quality system (Low). Market research indicates that the resulting profit to each firm for the alternative strategies are given by the payoff matrix

Firm B

High Low

Firm A High: 50, 40 60, 45

Low: 55, 55 15, 20

Getting a head start costs money. (You have to gear up a large engineering team.) Now consider the two-stage game in which, first, each firm decides how much money to spend to speed up its planning, and, second, it announces which product (High or Low) it will produce.

a)Which firm will spend more to speed up its planning?

b)How much will it spend?

c) Should the other firm spend anything to speed up its planning? Explain. The firm that should spend the most to speed up its planning is ?