Two oligopoly firms are in the process of evaluating their marketing strategies. Firm 1 can generate estimated profits of $10mil. From strategy A if the second firm reacts by strategy C and $15mil. From Strategy A if the second firm reacts with strategy D. On the other hand, firm 1 may follow strategy B which could return profits of $8mil. Or $9mil. If firm 2 reacts with strategy C or D respectively. The second firms potential profits are $8 and $12mil. From strategy C depending on whether firm 1 undertakes strategy A or B and $7 and $8 mil. From strategy D, depending on whether firm 1 follows Strategy A or B.
a.) Construct the payoff table for the above industry.
b.) Does each firm have a dominant strategy? What is it?
c.) Does the industry move toward an equilibrium position? If so, where?