Question
Two firms are in the chocolate market. Each can choose to go for the high end of the market (high quality) or the low end
Two firms are in the chocolate market. Each can choose to go for the high end of the market (high quality) or the low end (low quality). Resulting profits are given by the following payoff matrix:
Firm 2
Low High
Low -20, -30 900, 600
Firm 1 High 100, 800 50, 50
a. What outcomes, if any, are Nash equilibria? (2 points)
b.If the managers of both firms are conservative and each follows a maximin strategy, what will be the outcome? (2 points)
c.What is the cooperative outcome? (2 points)
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