Kodak & Fuji develop photographic film. Assume that there are no other significant manufactures, so that Kodak and Fuji constitute a duopoly (oligopoly). Assume that the firms can produce 500 or 750 rolls of film for a given market in a given quarter. Assume (1) that firms face the same cost structure; (2) that if both produce 500, then each will profit $16 per day; (3) that if Fuji produces 500 and Kodak 750, then Fuji earns $14 and Kodak earns $21; (4) that if both produce 750 rolls then each will profit $15. The remaining combination is implicit.

(a) Construct a game matrix for this scenario.

(b) Is there a Nash Equilibrium for this game? Why or why not.

(c) Suppose that Fuji & Kodak decide to collude. What level of output would be chosen? Why?