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Two firms at the Muscat international airport have the rights to carry passengers to and from hotels in Al-Qurum

Economics

Two firms at the Muscat international airport have

the rights to carry passengers to and from hotels in Al-Qurum. These two firms, Khalid Travels, and Modern Travels operate nine-passenger vans. These Duopolists cannot compete with price, but they can compete through advertising. Their payoff matrix is below:
 


Modern Travels


Increase Advertising
Don't increase advertising

Khalid Travel
Increase Advertising
25, 15
30, 0
Don't increase advertising
15, 20
40, 5

a)     Does each firm have a dominant strategy? If so, explain and what that strategy is.
b)     What is the Nash equilibrium? Explain where the Nash equilibrium occurs in the payoff matrix.
c)     Why, when Khalid Travel plays increase advertising and Modern Travels plays don't increase advertising is not a Nash Equilibrium? 

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