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3. (38 pts) Two competing firms in an oligopoly market, Red and Blue, need to decide which product they want
to introduce in the market, which is either Big or Small. Consider this is a single-shot simultaneous play game.
The table below shows the profits each firm will make for producing either Big or Small. As seen, how much
profit each firm makes is conditional upon which product the other firm makes.
FIRM
BLUE
Big
[tex]$300
Small
$[/tex]50
Firm RED
Big
Small
[tex]$100
$[/tex]80
[tex]$200
$[/tex]500
[tex]$800
$[/tex]300
3a. Does firm Red have a dominant strategy to produce one of the products? Explain!
3b. Does firm Blue have a dominant strategy to produce one of the products? Explain!
3c. If there are any Nash equilibria, identify any and all of them. Explain!
I
E

Sagot :

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