Samsung and Huawei are competitors in the mobile-phone market. The two companies are deciding whether to Produce or Not Produce a luxury mobile-phone. Because start-up costs are high and competition is fierce, if both firms decide to Produce and enter the market they will each receive a payoff of –1 (minus 1). On the other hand if Samsung decides to Produce and Huawei decides to Not Produce, Samsung would capture the market and get a payoff of 5 while Huawei would get a payoff of zero. Similarly, if Huawei decides to Produce and Samsung decides to Not Produce, Huawei would capture the market and get a payoff of 5 while Samsung would get a payoff of zero. If both firms decide to Not Produce, each firm gets a payoff of zero. 

1. Depict the game in normal and extensive form. 

2. Find any and all Nash equilibria in pure and mixed strategies. Briefly explain your procedures.  Huawei receives a subsidy of 3 from the Chinese government if it decides to Produce. This means that 3 will be added to each payoff of Huawei (from above) when it produces. 

3. Depict the new situation in normal form. 

4. Under the new situation, explain why it is profitable for Huawei to produce regardless of what Samsung does.