Question

7

7. Answer the following questions regarding the matrix below, which represents the strategic interaction between the two largest movie production studios, Universal Pictures and 20h Century Fox. They are each deciding the release dates for their own summer blockbuster action movies. They can release their movies in June, July, or August Because of limited demand for going to the movies, each firm would generally rather release their movies earlier than later. Similarly, they would rather not release their movies at the same time, as it dilutes the demand for their movies. The matrix form of the game is as follows: June August June 5,5 8,6 Universal July 4,6 5,5 6,5 August 7,8 4,6 5,4 a) Suppose Universal and Fox make their decisions simultaneously. Are there pure strategy Nash equilibria? If so, what are they? Show your work b) Suppose they move sequentially, and that Universal moves first. First set up the game tree. What will be the equilibrium path of the subgame perfect Nash equilibrium outcome? Would Universal want this to happen? Explain intuitively why or why not

Answer 1

For Auguat Juns Tuns &,6 6,5 Unversal 46 Angst 7,8 Augeat, ue 4 (Sus Aynst) 67 6,4) Unvers a Fo (46) (4.6) 4 Fer planys ugt Uni uers at play