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Business

30 June, 08:40

Scenario 10 Two rival firms in duopoly (a market in which there are only two firms that compete) are considering spending on the Research and Development (R&D). Each firm can spend either $20 million or nothing on R&D: If neither firm spends, Firm A earns $35 million and Firm B earns $75 million. If Firm A spends on R&D and Firm B doesn't, Firm A earns an economic profit of $85 million and Firm B make an economic loss of 5 million. If Firm B spends on R&D and Firm A doesn't, Firm B earns an economic profit of $85 million and Firm A make an economic loss of 5 million. If each firm spends on R&D, Firm A earns $15 million and Firm B earns $55 million. Refer to Scenario 10. (1) Is there a dominant strategy for Firm A? Explain. (2) Is there a dominant strategy for Firm B? Explain