Two firms compete in selling file-encryption software. Because both firms use the same encryption standard, files encrypted by one firm's software can be read by the other's, which is an advantage for consumers. Nonetheless, Firm 1 has a much larger market share because it entered the market earlier and its software has a better user interface. Both firms are now considering an investment in a new encryption standard. The two firms can either invest or not invest in this new standard. Resulting profit is given by the payoff matrix to the right. Suppose Firm 1 decides first whether to invest and then Firm 2 decides after learning of Firm 1's decision. What is the Nash equilibrium? The Nash equilibrium when Firm 1 moves first is for A. Firm 1 to invest and Firm 2 to invest. B. Firm 1 to not invest and Firm 2 to invest. C. Firm 1 to not invest and Firm 2 to not invest. D. Firm 1 to invest and Firm 2 to not invest. E. none of the above. Instead, suppose that Firm 2 decides first whether to invest. What is the Nash equilibrium in this instance? The Nash equilibrium when Firm 2 moves first is for A. Firm 2 to investinvest and Firm 1 to investinvest. B. Firm 2 to invest and Firm 1 to not invest. C. Firm 2 to not investnot invest and Firm 1 to not investnot invest. D. Firm 2 to not invest and Firm 1 to invest. E. none of the above.

Suppose that fizzo and pop hop are the only two firms that sell orange soda. the following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: pop hopadvertise doesn’t advertisefizzo advertise 10, 10 18, 2doesn’t advertise 2, 18 11, 11for example, the upper right cell shows that if fizzo advertises and pop hop doesn't advertise, fizzo will make a profit of $18 million, and pop hop will make a profit of $2 million. assume this is a simultaneous game and that fizzo and pop hop are both profit-maximizing firms.if fizzo decides to advertise, it will earn a profit if pop hop advertises and a profit if pop hop does not advertise.if fizzo decides not to advertise, it will earn a profit if pop hop advertises and a profit if pop hop does not advertise.if pop hop advertises, fizzo makes a higher profit if it chooses (not to advertise, to .if pop hop doesn't advertise, fizzo makes a higher profit if it chooses (not to advertise, to . suppose that both firms start off not advertising. if the firms act independently, what strategies will they end up choosing? fizzo will choose to advertise and pop hop will choose not to advertise.both firms will choose to advertise.fizzo will choose not to advertise and pop hop will choose to advertise.both firms will choose not to advertise.again, suppose that both firms start off not advertising. if the firms decide to collude, what strategies will they end up choosing? fizzo will choose not to advertise and pop hop will choose to advertise.both firms will choose not to advertise.fizzo will choose to advertise and pop hop will choose not to advertise.both firms will choose to advertise.