Consider the following innovation game: Firm A must decide whether or not to introduce a new product. Firm B must decide whether or not to clone firm A's product. If firm A introduces and B clones, then firm A earns $2 and B earns $15. If A introduces and B does not clone, then A earns $8 and B earns $1. If firm A does not introduce, both firms earn profits of 0. Which of the following is true?
A. The subgame perfect Nash equilibrium profits are ($2, 15).
B. It is not in A's interest to introduce.
C. The subgame perfect Nash equilibrium profits are ($8, 1).
D. None of the answers is correct.
Answer: A
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