Firm A and Firm B are duopolists. Each firm has two strategi…

Firm A and Firm B are duopolists. Each firm has two strategies: spend $30,000 a year on research and development (R&D) or spend nothing on R&D. If neither firm spends on R&D, Firm A’s economic profit is $80,000 and Firm B’s economic profit is $40,000. If each firm conducts R&D, market shares are maintained, but each firm’s profit is lower by the amount spent on R&D. If Firm A conducts R&D and Firm B does not, Firm A makes an economic profit of $120,000, while Firm B incurs an economic loss of $20,000. If Firm B conducts R&D and Firm A does not, Firm B makes a profit of $60,000 while Firm A loses $10,000. The Nash equilibrium indicates that