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Two large hedge funds, Active and Bear, need to decide whether to sell fully or hold the investment they have on Stellars, a stock from

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Two large hedge funds, Active and Bear, need to decide whether to sell fully or hold the investment they have on Stellars, a stock from a FinTech company that plunged 22% after a negative report came out. The losses that the hedge funds will face conditional on their choices are represented below: Hedge Fund Active Sell Hold -40% -40% -30% -45% -45% -30% -35% -35% Hedge Fund Bear Sell Hold Assuming that the two hedge funds are pressed to decide and hence cannot communicate with each others a) What is the Nash equilibrium of the game played by the hedge funds - Active and Bear? Explain. [4 marks] b) If the game was played repeatedly for an infinite number of times, would there be scope for the hedge funds to behave differently? Explain. (4 marks)

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