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Sports Authority and Modell's Sporting are engaging into the following one-shot game: if Sports Authority advertises and Modell's Sporting Goods does not, Sports Authority will make $20 million in profits and Modell's Sporting Goods will make $6 million. If Modell's Sporting Goods advertises and Sports Authority does not, Sports Authority will make $2 million and Modell's Sporting Goods will make $6 million. If Sports Authority advertises and Modell's Sporting Goods advertises, each firm earns $10 million. If neither firm advertises, Modell's Sporting Goods will make $8 million and Sports Authority will make $4 million. (a) Write the payoff matrix for the above game.
(b) Does Sports Authority have a dominant strategy?
(c) Does Modell's Sporting Goods have a dominant strategy?
(d) What is the Nash equilibrium for the one-shot game?
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