If Firm 1 chooses to release the console in October with probability of 0.692 or December with a probability of 0.308, then Firm 2 is indifferent between choosing a release date.If Firm 2 released the console in October with probability of 0.50 or December with a probability of 0.50, then Firm 1 is indifferent between choosing a release dateSuppose now that instead of choosing the release date at the same time, the firms choose sequentially (but still in advance). Firm A chooses its release date first, then firm B observes that date and chooses its own date. Thepayoffs are otherwise the same as above. Represent the game tree corresponding to this dynamic game. Two firms A and B manufacture video game consoles. Firm A's console is less tech-nologically advanced than that of firm B, and firm A knows that if consumers get tochoose between both consoles at the same time, they would choose the console of firmB. Therefore, firm A's only chance to sell a large number of consoles is to release it ata different time than firm B. Firm B prefers to release the console at the same time asfirm A to benefit from the hype and blog reviews.Suppose first that the firms have to commit to a release date in advance. Firms canchoose to release the console either in October or in December. Therefore, while thegame has some dynamic aspect, we can think of the choice of the release date as asimultaneous move game, represented by the payoff matrix below.A \ BOctoberOctober(10, 100)December (50, 50)December(100, 50)(10, 100)

In game theory, a game tree is a graphical representation that depicts the sequential…

Answered: If Firm 1 chooses to release the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If Firm 1 chooses to release the console in October with probability of 0.692 or December with a probability of 0.308, then Firm 2 is indifferent between choosing a release date.

If Firm 2 released the console in October with probability of 0.50 or December with a probability of 0.50, then Firm 1 is indifferent between choosing a release date

Suppose now that instead of choosing the release date at the same time, the firms choose sequentially (but still in advance). Firm A chooses its release date first, then firm B observes that date and chooses its own date. The
payoffs are otherwise the same as above. Represent the game tree corresponding to this dynamic game.

Two firms A and B manufacture video game consoles. Firm A's console is less tech-
nologically advanced than that of firm B, and firm A knows that if consumers get to
choose between both consoles at the same time, they would choose the console of firm
B. Therefore, firm A's only chance to sell a large number of consoles is to release it at
a different time than firm B. Firm B prefers to release the console at the same time as
firm A to benefit from the hype and blog reviews.
Suppose first that the firms have to commit to a release date in advance. Firms can
choose to release the console either in October or in December. Therefore, while the
game has some dynamic aspect, we can think of the choice of the release date as a
simultaneous move game, represented by the payoff matrix below.
A \ B
October
October
(10, 100)
December (50, 50)
December
(100, 50)
(10, 100)

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