Problem: When both firms charge $4, each will make a profit of $12. If Firm 1 charges $4 and Firm 2 charges $6, Firm 1 will make $20 and Firm 2 $4.
Firm 1
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Competitive Strategy
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Charge $4
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Charge $6
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Up
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$12, $12
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$20, $4
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Down
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$4, $20
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$16, $16
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1) Is there a dominant strategy for Firm 1? If so, what is it?
2) Is there a dominant strategy for Firm 2? If so, what is it?
3) Is there Nash equilibrium? If so, what is it?