Suppose that Toyota and GM are considering entering a new market for electric automobiles and that their profits (in millions of dollars) form entering or staying out of the market are the following:
1. If the firms make their decisions simultaneously, do either or both firms enter?
2. How would your answer change if the U.S. government committed to paying GM a lump-sum subsidy of $50 million on the condition that it would produce this new type of car?
Two firms are planning to sell 10 or 20 units of their goods and face the following payoff matrix:
1. What is the Nash equilibrium if both firms make their decisions simultaneously? Why?
2. Suppose that Firm 1 can decide first. What is the outcome? Why?
3. Suppose that Firm 2 can decide first. What is the outcome? Why?