1. Consider the payoff matrix shown to the right. Firm 1 chooses whether or not to enter (market in) a territory where Firm 2 is located. If Firm 1 enters Firm 2 can either oppose entry (by reducing prices, for example) or not oppose by maintaining current prices. Due to advertising and printing schedules, Firm 2 must choose its price before it knows if Firm 1 will enter and Firm 1 must make its entry decision (due to contractual considerations) before it knows Firm 2's pricing decision. Suppose these decisions are made only once and for all time. Using your deep knowledge of game theory you predict:
- Firm 1 enters, Firm 2 opposes.
- Firm 1 enters, Firm 2 does not oppose.
- Firm 1 does not enter, Firm 2 opposes.
- Firm 1 does not enter, Firm 2 does not oppose.
- Firm 1 and Firm 2 choose randomly since there is no Nash Equilibrium.
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