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(Solved): Consider two strategically dependent firms in an oligopolistic industry, Firm A and Firm B. Firm A ...




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Consider two strategically dependent firms in an oligopolistic industry, Firm A and Firm B. Firm A knows that if it offers extended warranties on its products but Firm B does not, it will earn million in profits, and Firm B will earn \$2 million. Likewise, Firm B knows that if it offers extended warranties but Firm A does not, it will earn million in profits, and Firm A will earn \$2 million. The two firms know that if they both offer extended warranties on their products, each will earn million in profits. Finally, the two firms know that if neither offers extended warranties, each will earn \$5 million in profits. Using the payoff matrix shown at right, fill in the values below for the situation faced by these two firms.


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