Two computers firms. A and B. are planning to market network systems for office
ID: 1209465 • Letter: T
Question
Two computers firms. A and B. are planning to market network systems for office Information management Each firm can develop either a fast, high quality system (H), or a slower, low quality system (L). Market research indicates that the resulting profits to each firm for the alternative strategies are given by the following payoff matrix: if both firms make their decisions at the same time and follow maximum (low risk) strategies, what will the outcome be? Suppose both firms try to maximize profits, but firm A has a head start in planning, and can commit first Now what will the outcome be? What will the outcome be if Firm B has the head start in planning and can commit first b Does any firm have a 'dominant Strategy?Explanation / Answer
A)
Here when the firm are choosing maximum strategies, the a firm determines the worst outcome of each determines, then chooses the option that maximises the payoff among the worst outcomes. In the above strategy, if the firm A chooses H,then the firm B chooses the worstoutcome of H. Then Firm A's payoff is 30. on the same way, if firm A chooses L, Then firm B's chooses L, then A's payoff is 20. Using the maximin strategy, If firm A chooses H, and firm B chooses L, then worst payoff is firm A chooses L,then the payoff is 20. On the same way if firm B chooses H, then the worst payoff is 30. if firm A chooses L. So the Maximin strategy Both Firm A nd B produce the high quality system.
B)
Using the above strategy Firm A will choose first ,that is H, Becuase firm A knows Firm B chooses L. Becuase the the Payoff L gives maximum payoff of B. This gives firm A as 50. On the same way if firm B chooses first,then choose H and knows firm B chooses L. Because L gves maximum payoff of A,that is 40. This gives firm B as 60.
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