If we have all our arrows drawn correctly we see that there are no arrows pointing away from Firm 1 Low, Firm 2 High. As long as Firm 1 believes that Firm 2 will play High Firm 1 will stick with Low. AND, as long as Firm 2 believes Firm 1 will play Low Firm 2 will continue playing High.

   Since both players are doing the best they can given what the other player is doing Firm 1 Low, Firm 2 High is a Nash equilibrium. Our method of drawing arrows and finding outcomes with no arrows pointing away works. This means there is yet another Nash equilibrium.

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