Two Firms, Mac Portsmouths and Southsea Burger must decide whether to put one of their restaurants in University Campus. The strategies are to Enter or Dont Enter. If either firm plays Dont Enter, it earns 0 profits. If one firm plays Enter and the other plays Dont Enter, the firm that plays Enter earns 200,000 per year in profits and the firm that plays Dont enter always yields 0 profits. If both firms choose to play Enter, both lose 50,000 per year as there is not enough demand for two restaurants to make positive profits.

a) Construct the pay-off matrix [5 marks]

b) Is there a dominant strategy for any of the firms? [5 marks]

c) Is there a Nash equilibrium in pure strategies? If yes which one(s). [8 marks]

d) Find all Nash equilibria and draw best response graph for each of the firm. [7 marks]