# Suppose that Toyota and GM are considering entering a new market for electric automobiles and… 1 answer below »

Question 1

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?

Question 2

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?