▁will ▁realize ▁a ▁profit ▁of ▁ 5 0 ▁million ▁dollars ▁while ▁the ▁other ▁firm ▁will ▁make ▁nothing . ▁The ▁two ▁Nash ▁equilib ria ▁of ▁this ▁game ▁( mark ed ▁in ▁pur ple ) ▁are ▁the ▁situations ▁in ▁which ▁only ▁one ▁firm ▁enters ▁– ▁but ▁which ▁firm , ▁domestic ▁or ▁foreign , ▁is ▁ind et erm inate . ▁In ▁such ▁a ▁situation ▁if ▁the ▁foreign ▁firm ▁has ▁a ▁slight ▁initial ▁advantage ▁over ▁the ▁domestic ▁firm ▁( per haps ▁because ▁it ▁began ▁product ▁development ▁earlier ) ▁the ▁domestic ▁firm ▁will ▁stay ▁out ▁and ▁the ▁foreign ▁firm ▁will ▁enter . ▁ ▁The ▁game ▁changes ▁however ▁if ▁the ▁government ▁cred ibly ▁promises ▁to ▁subs id ize ▁the ▁domestic ▁firm ▁if ▁it ▁enters ▁the ▁market , ▁as ▁illustrated ▁in ▁Figure ▁ 2 . ▁Suppose ▁the ▁government ▁promises ▁a ▁subs id y ▁of ▁twenty ▁million , ▁regardless ▁of ▁whether ▁the ▁foreign ▁firm ▁also ▁enters ▁or ▁not . ▁In ▁that ▁case , ▁if ▁the ▁foreign ▁firm ▁enters ▁the ▁domestic ▁firm ▁will ▁lose ▁ten ▁million ▁from ▁entry ▁costs ▁but ▁will ▁be ▁more ▁than ▁compens ated ▁by ▁the ▁government ▁subs id y , ▁ending ▁up ▁with ▁a ▁net ▁pay off ▁of ▁ten ▁million . ▁If ▁the ▁foreign ▁firm ▁does ▁not ▁enter ▁of ▁course , ▁it ▁is ▁still ▁prof itable ▁for ▁the ▁domestic ▁firm ▁to ▁enter . ▁As ▁a ▁result , ▁regardless ▁of ▁the ▁action ▁of ▁the ▁foreign ▁firm , ▁the ▁domestic ▁firm ' s ▁in cent ive ▁is ▁to ▁enter ▁the ▁market . ▁Ant icip ating ▁this , ▁the ▁foreign ▁firm ▁will