Question: 1. Toyota and GM are considering staying in the market for electric vehicles or leaving the market for electric vehicles. Assume that this is

1. Toyota and GM are considering staying in the market for electric vehicles or leaving the market for electric vehicles. Ass

1. Toyota and GM are considering staying in the market for electric vehicles or leaving the market for electric vehicles. Assume that this is a simultaneous move, one shot game, i.e., each player moves simultaneously, and the game is played once. The firms are not allowed to collude and make joint decisions. The two firms face the following profit matrix. The number in the table show the profit for each firm from each outcome Toyota Stay in the market Leave the market Stay in the market 10 3 -40 GM 200 (a) What is each firm's best response to its rival's possible actions? Leave the market (b) What is Toyota's dominant strategy (if they have one)? (c) What is GM's dominant strategy (if they have one)? (d) What is the Nash equilibrium? Explanation is not necessary. 250 0 (i) If Toyota chooses "stay in the market" what is GM's best choice? (ii) If Toyota chooses "leave the market" what is GM's best action? (iii) If GM chooses "stay in the market" what is Totota's best choice? (iv) If GM chooses "leave the market" what is Toyota's best choice? 2 0

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a i If Toyota chooses stay in the market GMs best response is to also stay in the market since the profit for GM in this case is 200 which is greater than the profit of 3 when GM leaves the market ii ... View full answer

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