Apple and Samsung control the majority of the Smart Phones. Suppose the diagram above represents their strategic options, either to offer an expensive or a cheap phone in the market. If both firms offer an expensive phone, they will each earn 4 billion dollars. If Samsung offers a cheap phone, while Apple offers only an expensive phone, Samsung will earn $6 billion and Apple will earn $2 billion, and vice versa. If they both offer a cheap phone, they will each earn $3 billion. What are the profits in the Nash Equilibrium? a. Samsung earns $2 billion and Apple earns $6 billion. b. Both firms earn $3 billion. c. Both firms earn $4 billion. d. Samsung earns $6 billion and Apple earns $2 billion.
Apple and Samsung control the majority of the Smart Phones. Suppose the diagram above represents their strategic options, either to offer an expensive or a cheap phone in the market. If both firms offer an expensive phone, they will each earn 4 billion dollars. If Samsung offers a cheap phone, while Apple offers only an expensive phone, Samsung will earn $6 billion and Apple will earn $2 billion, and vice versa. If they both offer a cheap phone, they will each earn $3 billion. What are the profits in the Nash Equilibrium?
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a. Samsung earns $2 billion and Apple earns $6 billion. |
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b. Both firms earn $3 billion. |
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c. Both firms earn $4 billion. |
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d. Samsung earns $6 billion and Apple earns $2 billion. |
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