Consider the following situation: A German company and a French company are deciding in which market they want to sell.

[answerhappygod]

Consider the following situation: A German company and a French
company are deciding in which market they want to sell. (They can
each only be active in one market.) Both can decide between their
home market (Germany for the German company, France for the French
company) and the other company’s home market. If they are both
active in the same market, profits will be low. If they both stay
exclusively in their home markets, profits will be very high. If
they are both active exclusively in a foreign market, they still
each have a market for themselves, but will not make as much money.
They can also decide to agree to bundle some production, which will
give them the largest profits – but each has an incentive to
deviate by using the other’s resources and by only selling in some
market (but not contributing to the cooperation). The following
bimatrix G gives the payoffs:

Consider The Following Situation A German Company And A French Company Are Deciding In Which Market They Want To Sell 1 (70.55 KiB) Viewed 54 times

Foreign 2.2 2.1 1.6 Foreign Home Cooperation French company Home Cooperation 1,2 6,1 4,4 8,1 1.8 7,7 German company Imagine that this game is repeated twice (so we are considering G(2)). (a) Which of the following total payoffs are possible in an SPNE of G(2)? i. (14,14) ii. (3,8) iii. (11,11) iv. (6,6) (b) Pick one of the feasible options from (a) and write down the SPNE that achieves these total payoffs. (Make sure you give the full SPNE!) (c) Pick one of the infeasible options from (a) and explain why these total payoffs cannot be achieved in an SPNE (2-3 sentences).