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    Nash equilibrium: explained

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    The following payoff matrix represents the long-run payoffs for two duopolists faced with the option of buying or leasing buildings to use for production. Determine whether any dominant strategies exist and whether or not there is a Nash equilibrium. In any case, what is the logical solution and why?

    Firm 1
    Lease Buy
    Building Building

    Lease F1 = 500 F1 = 750
    Firm 2 F2 = 500 F2 = 400

    Buy F1 = 300 F1 = 600
    F2 = 600 F2 = 200

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    Solution Preview

    As we can see that there is no dominant strategy exists between Firm 1 and Firm ...

    Solution Summary

    This solution determine whether any dominant strategies exist and whether or not there is a Nash equilibrium.

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