Therefore,American's profits if =2=25 (when both firms have MC=AC=25) % π2=(100-25-25(25)-(25)25)=$625 The difference in profit with and without the cost-saving investment for American is $400.American would be willing to invest up to $400 to reduce its marginal cost to25 if Texas Air also has marginal costs of 25. eting firms are each plannin their choices at the same time.The resulting payoffs are shown below. We are given the following payoff matrix,which describes a product introduction game: Firm 2 A B C A -10-10 0.10 10.20 Firml B 10,0 -20.-20☐-5,15 20,10 15.-5-30,-30 a.Are there any Nash equilibria in pure strategies? If so,what are they? b.If both firms use maximin strategies,what outcome will result? c.If Firm 1 uses a maximin strategy and Firm 2 knows,what will Firm 2 do? a.Yes,there are two(1)Given Firm 2 chooses A,Firm 1 chooses C:given Firm 1 chooses C.Firm 2 chooses A.(2)Given Firm 2 chooses C,Firm 1 chooses A:given Firm 1 chooses A.Firm 2 chooses c. b.If both fi cho ccording to maximin,Firm 1 will choose Product A and Firm 2 will choose ProductA,resulting in-10 payoff for both c.Fimm 2 will choose Product C in order to maximize payoffs at 10,20.Therefore, American’s profits if Q1 = Q2 = 25 (when both firms have MC = AC = 25) are 2 = (100 - 25 - 25)(25) - (25)(25) = $625. The difference in profit with and without the cost-saving investment for American is $400. American would be willing to invest up to $400 to reduce its marginal cost to 25 if Texas Air also has marginal costs of 25. 2 Two competing firms are each planning to introduce a new product. Each will decide whether to produce Product A, Product B, or Product C. They will make their choices at the same time. The resulting payoffs are shown below. We are given the following payoff matrix, which describes a product introduction game: Firm 2 A B C A -10,-10 0,10 10,20 Firm 1 B 10,0 -20,-20 -5,15 C 20,10 15,-5 -30,-30 a. Are there any Nash equilibria in pure strategies? If so, what are they? b. If both firms use maximin strategies, what outcome will result? c. If Firm 1 uses a maximin strategy and Firm 2 knows, what will Firm 2 do? a. Yes, there are two(1)Given Firm 2 chooses A,Firm 1 chooses C;given Firm 1 chooses C,Firm 2 chooses A.(2)Given Firm 2 chooses C,Firm 1 chooses A;given Firm 1 chooses A,Firm 2 chooses c. b. If both firms choose according to maximin,Firm 1 will choose Product A and Firm 2 will choose Product A,resulting in -10 payoff for both. c. Firm 2 will choose Product C in order to maximize payoffs at 10,20