In the following payoff matrix, each firm has two possible strategies, and must move simultaneously. Assuming that each knows only its own payoff structure, what decision would each firm make? Is this a Nash equilibrium? Suppose each player can see the entire payoff structure instead of only its own. How would this affect Firm 2? Payoffs shown are (Firm 1, Firm 2): Firm 2 A B A 3, 1 2, 0 Firm 1 В 2, 4 1,5

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1. In the following payoff matrix, each firm has two possible strategies, and must move
simultaneously. Assuming that each knows only its own payoff structure, what decision would
each firm make? Is this a Nash equilibrium? Suppose each player can see the entire payoff
structure instead of only its own. How would this affect Firm 2? Payoffs shown are (Firm 1, Firm
2):
Firm 2
A
В
A
3, 1
2, 0
Firm 1
B
2, 4
1, 5
Transcribed Image Text:1. In the following payoff matrix, each firm has two possible strategies, and must move simultaneously. Assuming that each knows only its own payoff structure, what decision would each firm make? Is this a Nash equilibrium? Suppose each player can see the entire payoff structure instead of only its own. How would this affect Firm 2? Payoffs shown are (Firm 1, Firm 2): Firm 2 A В A 3, 1 2, 0 Firm 1 B 2, 4 1, 5
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