Two companies are considering whether to enter a new market. The decision matrix in Figure 9P-8 shows each company's payoff, depending on whether one, both, or neither enter the market. Company A is in Costa Rica. Company B is in Nicaragua.

a. If Company A enters, what should Company B do?    
b. If Company B enters, what should Company A do?    
c. Suppose the Nicaraguan government releases a press statement that it will cover any profit losses for Company B. How much will this policy cost the Nicaraguan government?

Transcribed Image Text:

Company B Enter Not Enter -S1M S0 5 SIM S3M S3M S0 SO $0