Whatever strategy Firm 2 chooses Firm 1 will always be better off playing S2, its dominant strategy. Keep in mind that Firm 2 is fully aware of the game faced by Firm 1 so it is aware that S2 is a dominant strategy. For some games this idea will be crucial to solving the game.
As we shall see though, it isn't hard to figure out what Firm 2 will do.
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