Samsung and Apple are considering launching a new version of their respective handsets. The choices for...
Samsung and Apple are considering launching a new version of their respective handsets. The choices for each firm are to Enter or to Wait. The two firms make these choices simultaneously. The payoffs are as follows. If both firms choose to Enter, the payoff is 2 to each firm. If both firms choose to Wait, the payoffs are 5 to Apple and 4 to Samsung. If Apple decides to Wait and Samsung Enters, the payoffs are 8 to Apple and 4 to Samsung. Finally, if Apple Enters and Samsung Waits, the payoffs are 6 and 7 to Apple and Samsung, respectively. What are the Nash equilibria of the game?
Homework Answers
Payoff Matrix is as follows:
Samsung
|
Enters |
Waits |
|
|
Enters |
(2,2) |
(6,7) |
|
Waits |
(8,4) |
(5,4) |
Apple
There are two Nash equilibria of the game:
1. Samsung waits and Apple enters with payoff of 6 & 7 to Apple and Samsung respectively (Reason- If Apple chooses to wait, its payoff will be reduced to 5)
2. Apple waits and Samsung enters with payoff of 8 & 4 to Apple and Samsung respectively (Reason-If Samsung chooses to wait, its payoff will be reduced to 4)
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