### Two firms are planning their marketing strategies

##### Reference no: EM13869344

Two firms are planning their marketing strategies.

Firm K can earn \$35 million in profits from strategy S if firm L responds with strategy P, and \$7.5 million in profit from S if L responds with strategy Q. Firm K can follow strategy T, which returns \$26 million if firm L responds with strategy P and \$5 million if L responds with strategy Q.

Firm L’s potential profits would be \$10 million and \$18 million from strategy P, depending on whether firm K implements strategy S or T. Firm L’s profits from strategy Q would be \$14 million or \$12 million depending on whether firm K follows strategy S or T.

a. Construct the payoff table.

b. Does either firm have a dominant strategy? Dominated? Is there a stable equilibrium?

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