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Consider an industry with two firms. Each firm can spend either 0, $1, or $4 on a lobbying effort. Call the amount spent by Firm i, Li. Now, regardless of their lobbying effort, each firm gets an identical subsidy having present value . (This subsidy depends on both the total lobbying effort and on how widespread it is.)

Treating it as a 2-player game, construct a 3 × 3 diagram showing the net payoffs of each firm.

Find all Nash equilibria for the game.

Which is the most likely outcome? Why?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92847948

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