Two companies are considering whether to enter a new market. The decision matrix in the figure below shows each company’s payoff, depending on whether one, both, or neither enters the market. Company A is in Costa Rica. Company B is in Nicaragua.


a. If Company A enters, what should Company B do?


b. If Company B enters, what should Company A do?
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c. Suppose the Nicaraguan government releases a press statement that it will cover any profit losses for Company B. How much will this policy cost the Nicaraguan government?
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