Plz use both pure NE and MIXED strategy (with Probability)
Consider a firm with two agents – 1 and 2. Both agents have tochoose between two options: Client Focus or Cost Focus. If bothchoose Client the payoffs to 1 are 20 and 10 to agent 2. If bothagents choose to play Cost the payoffs are 15 to agent 1 and 25 toagent 2, respectively. Finally, if any other combination of actionsis chosen the payoffs to each agent are 0.
a. Assume that the agent choose their actions simultaneously.Draw the normal form of the game and derive all of the Nashequilibria.
b. Now assume that the game is played sequentially: Agent 1makes her choice of action first, this is observed by Agent 2, whothen makes his choice. Draw the extensive form of the game and findthe subgame perfect equilibria. Briefly interpret this game in thecontext of: (i) leadership and corporate culture; and (ii) theBasic Value Maximisation Principle.
