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. Sony’s
dominant strategy is _______________(Alpha, Beta, Neither: it has no dominant
strategy).
b. Vizio’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?

 

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