Answer to Question #134086 in Microeconomics for AbdulQadeerabbasi

Question

Q3. Suppose that Toyota and GM are considering entering a new market for electric automobiles and that their profits (in millions of dollars) from entering or staying out of the market are described. If both enter Toyota gets profit of 10 million dollars while GM bears loss of 40 million dollars. If both do not enter both get no profit. If Toyota enters it gets a profit of 250 million dollars while GM does not enter and earn no profit. If GM enters it gets a profit of 200 million dollars
while Toyota does not enter and earn no profit. (4)
a. If the firms make their decisions simultaneously, do either or both firms enter? Is there any dominant strategy?
b. How would your answer change if the U.S. government committed to paying GM a lump-sum subsidy of $50 million on the condition that it would produce this new type of car?

Answer 1

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