[zxc5566]

Two bath and body stores are considering whether they should collude with or compete with theircompetitor. If they collude, both firms will make $50 Million in profits each. If Serenity cheats on theagreement while Rubber Ducky does not, Serenity will make $60 Million in profits, and Rubber Ducky willlose $10 Million. If Rubber Ducky cheats on the agreement while Serenity does not, Rubber Ducky willmake $40 Million in profits while Serenity will lose $8 Million. If both firms cheat on the agreement, eachfirm will make normal economic profit.
a) Fill in the payoff table.
b) What is Serenity’s dominant strategy (if any)?
c) What is Rubber Ducky’s dominant strategy (if any)?
d) What is the Nash equilibrium outcome for this game?e) What are the Nash equilibrium payoffs for this game?

[ma0641]

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