Consider two stores (Mitre 10 and Bunnings) serving a small community:

First, Bunnings will choose whether to charge high prices or low prices,Mitre 10 then will observe Bunnings' decision and then choose their pricing strategy

?If they both choose High, each earns $10 million

?If they both choose Low, each earns $8 million

?If one chooses High and the other chooses Low, the one that chose High earns $6 million and the other earns $14 million.

Based on the game tree (shown as follows), the best solution for the game is Low price Low price.

a)Please transform this sequential game into a simultaneous game and find the equilibrium outcome(s), assuming the two firms make their pricing decisions at the same time. (Hint: you need to draw the payoff matrix and find the equilibrium outcome(s)

b) Based on the result of (a), can you find a dominant equalibrium oucome? State why.