Question: b) AA Pte Ltd and BB Pte Ltd are the only two companies in the electricity industry in Intelect country. Each firm is considering whether

b) AA Pte Ltd and BB Pte Ltd are the only two companies in the electricity industry in Intelect country. Each firm is considering whether to advertise or not to advertise to promote their electricity offering. Their monthly profit payoff is shown in the table below: (i) Determine the type of market structure that AA and BB are operating in. List TWO (2) market features for this type of market structure. (2 marks) (ii) Determine the dominant strategy for AA and BB. Find the Nash Equilibrium. What is the outcome for AA and BB ? (6 marks) (iii) Is this a prisoner dilemma game? Explain. (2 marks) ic) Explain what is negative production externality. Explain, with an aid of a fully labeled diagram, on how taxes can be used to correct negative production externality. (6 marks)

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