# 1. Sony and Vizio must each decide which technology to utilize in building their 2015 model ultra…

1.

Sony and

Vizio must each decide which technology to utilize in building their 2015 model

ultra high definition television

(HDTV) sets: either Alpha technology or Beta technology. Sony has a

technological advantage in using Alpha technology and Vizio has a technological

advantage in using Beta technology. The payoff table below shows the profit

outcomes for both firms in the various possible technology choice outcomes.

Vizio

Alpha Beta

Sony Alpha A

$16, $18 B

$20, $26

Beta C

$19, $22 D

$24, $20

Payoffs

in billions of dollars of profits.

Suppose the technology decision between Alpha and Beta will

be made simultaneously. Answer the following questions:

a. Sonyâ€™s

dominant strategy is _______________(Alpha, Beta, Neither: it has no dominant

strategy).

b. Vizioâ€™s

dominant strategy is _______________(Alpha, Beta, Neither: it has no dominant

strategy).

c. Explain

why cell D is or is not strategically stable.

d. As a

simultaneous game, does this decision possess any Nash equilibrium cells? If so, which cell(s)? Explain why these cells are Nash.

e. Now

suppose that Sony decides to make a strategic commitment to one of the

technologies so that it can make the first move in a sequential decision

game. Complete the game tree (on the

answer sheet) for the sequential game in which Sony moves first, by filling in

the blanks using the information in the preceding payoff table.

Use the roll-back method to find the Nash equilibrium

decision path. Mark the best decisions at ALL decision nodes and then circle

this decision path on the game tree above.

f. Now

suppose instead Vizio decides makes a strategic commitment to one of the

technologies so that it makes the first move.

Complete the game tree (on the answer sheet) for the sequential game in

which Vizio moves first, by filling in the blanks using the information in the

payoff table.

Use the roll-back method to find the Nash equilibrium

decision path. Mark the best decisions at ALL decision nodes and then circle

this decision path on the game tree above.

g. Briefly

give a definition of first-mover and second-mover advantage.

h. Which

firm(s) possesses a FIRST-mover advantage and which a SECOND-mover

advantage?

1. a. _________ b. _______

c. Explain

why cell D is or is not strategically stable.

d. As a

simultaneous game, does this decision possess any Nash equilibrium cells? If so, which cell(s)? Explain why these cells are Nash.

e. Game tree

for the sequential game in which Sony moves first.

f. Game

tree for the sequential game in which Vizio moves first.

g. Briefly

give a definition of first-mover and second-mover advantage.

h. Which

firm(s) has (have) a FIRST-mover advantage and which firm(s) has (have) a

SECOND-mover advantage?