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Two firms are deciding on whether to build new factories. They can choose whether to build in an Urban environment, a Suburban environment, or

 

Two firms are deciding on whether to build new factories. They can choose whether to build in an Urban environment, a Suburban environment, or a Rural environment. Payoffs from their decision are in the matrix below. Firm 1 Rural Suburban Urban Rural -1 6 6 -1 4 5 Firm 2 Suburban 6 -1 -1 6 4 5 Urban 5 4 5 4 7 7 a. Is this game dominance-solveable (e.g., can it be solved by identifying dominant strategies or using IEDS)? b. If Firm 1 uses the minimax strategy, what strategy will they employ? c. If Firm 2 uses the minimax strategy, what strategy will they employ? d. Are the combined results from parts b and c a Nash equilibrium? Why or why not?

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