Represent the following games in a normal form and find their Nash equilibria. b) Firm A decides whether to enter the market in which firm B already operates. Firm B knows about firm A’s considerations. If firm A enters the market, both firms decide at the same time whether to run an advertising campaign. In the opposite case, only firm B decides about running an advertising campaign. When both firms are in the market, each obtains profit of $3 mln if both pursue a campaign, or of $5 mln if both decide not to run a campaign. If only one firm runs a campaign, it obtains $6 mln, whereas the other firm gets $1 mln. If only firm B operates in the market, it obtains $4 mln when it advertises its product, or $3.5 mln if it does not. Firm A receives $0 if it does not enter the mar
Economics
Represent the following games in a normal form and find their Nash equilibria. b) Firm A decides whether to enter the market in which firm B already operates. Firm B knows about firm A’s considerations. If firm A enters the market, both firms decide at the same time whether to run an advertising campaign. In the opposite case, only firm B decides about running an advertising campaign. When both firms are in the market, each obtains profit of $3 mln if both pursue a campaign, or of $5 mln if both decide not to run a campaign. If only one firm runs a campaign, it obtains $6 mln, whereas the other firm gets $1 mln. If only firm B operates in the market, it obtains $4 mln when it advertises its product, or $3.5 mln if it does not. Firm A receives $0 if it does not enter the market.
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