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Two Firms in a Local Market Compete in the Manufacture

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Two firms in a local market compete in the manufacture of cyberwidgets. Each firm must decide if it will offer a warranty or not. The pay-offs of each firm's strategy is a function of their competitor as well. The pay-off matrix is presented below. Two firms in a local market compete in the manufacture of cyberwidgets. Each firm must decide if it will offer a warranty or not. The pay-offs of each firm's strategy is a function of their competitor as well. The pay-off matrix is presented below.    If firm #1 announces they will offer a warranty regardless of what firm #2 does, is this a credible threat? Why or why not?
If firm #1 announces they will offer a warranty regardless of what firm #2 does, is this a credible threat? Why or why not?


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