Two entrepreneurs, A and B, independently choose whether to sell their product in country X or country Y. Each entrepreneur prefers to be the only one selling in the country she chooses. The size of the market in country X is larger than in country Y, but selling in country X requires an investment of e> 0. The payoffs are given by the following matrix: B X X2-c,2-e 4,4-c 4-c,4 1,1 (a) Identify all dominated strategies for each player for each e > 0. In each case, indicate whether the domination is weak or strict. Solution: For each player, if c = 3 then Y weakly dominates X and if e> 3 then Y strictly dominates X. If e<3 there is no dominated strategy. (b) Find all Nash equilibria of this game for each e > 0, allowing for both pure and mixed strategies. Solution: If e> 3, the only NE is (Y,Y). If e<3, (X,Y) and (Y,X) are NE and so is the mized strategy profile in which each chooses X with probability. If c=3, then any strategy profile in which one player chooses Y (and the other chooses any mized strategy) is a NE.

Write a sentence or two defining the following terms in your own words. Give examples of each.     j. Dishonest workers               k. Elastic Demand               l. Entrepreneurship

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The opportunity cost of working is __ Select one: a. the wage you earn for the time spent working. b. too high to even consider not working. c. what you can buy because you worked. d. what you would have done during the time if you were not working.

What are the environment in which business operates?