Suppose that auctions have never been conducted online and eBay is contemplating entering the market for online auctions. Another company, Yahoo! Auctions, also wants to enter this market. If eBay enters the market but Yahoo! Auctions does not, then eBay earns enormous profits and Yahoo! Auctions earns 0. Similarly, if Yahoo! Auctions enters the market but eBay does not, then Yahoo! Auctions earns enormous profits and eBay earns 0. If both enter the market, then each suffers very large losses. If neither enters, each earns 0.
a. Construct the pay-off matrix for eBay and Yahoo! Auctions indicating the strategies they may choose.
b. Find the Nash equilibrium for this game.