Two high tech firms, Alpha Electronics and Mega Technology, are contemplating investing in research and development on the new generation of flat screen computers. The cost of the investment is high but the investment may generate good profits for the company that invested, especially if the other company did not do so. The payoff matrix below describes the profits that the two firms will earn under different situations:

(i) Solve for the Nash equilibrium and explain whether the game is a prisoner's dilemma game. (8 marks)

(ii) What will happen if the game becomes a sequential game where Mega gets to decide first? Demonstrate and explain with a suitable decision tree diagram. (10 marks)

Mega Technology Alpha Invest Do not invest Electronics Invest Alpha: $15000 Alpha: $60000 Mega: $35000 Mega: -$10000 Do not invest Alpha: -$20000 Alpha: $50000 Mega: $60000 Mega: $50000