Two firms are in the chocolate market. Each can choose to go for the high end of the market (high quality) or the low end (low quality). Resulting profits are given by the following payoff matrix:

a. What outcomes, if any, are Nash equilibria?
b. If the managers of both firms are conservative and each follows a maximin strategy, what will be the outcome?
c. What is the cooperative outcome?
d. Which firm benefits most from the cooperative outcome? How much would that firm need to offer the other to persuade it to collude?

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Firm 2 Low High Low -20,-30 900, 600 High 100, 800 50, 50 Fim High