If Firm 1 chooses to release the console in October with probability of 0.692 or December with a probability of 0.308, then Firm 2 is indifferent between choosing a release date. If Firm 2 released the console in October with probability of 0.50 or December with a probability of 0.50, then Firm 1 is indifferent between choosing a release date Suppose now that instead of choosing the release date at the same time, the firms choose sequentially (but still in advance). Firm A chooses its release date first, then firm B observes that date and chooses its own date. The payoffs are otherwise the same as above. Represent the game tree corresponding to this dynamic game.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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If Firm 1 chooses to release the console in October with probability of 0.692 or December with a probability of 0.308, then Firm 2 is indifferent between choosing a release date.

If Firm 2 released the console in October with probability of 0.50 or December with a probability of 0.50, then Firm 1 is indifferent between choosing a release date

Suppose now that instead of choosing the release date at the same time, the firms choose sequentially (but still in advance). Firm A chooses its release date first, then firm B observes that date and chooses its own date. The
payoffs are otherwise the same as above. Represent the game tree corresponding to this dynamic game.

 

Two firms A and B manufacture video game consoles. Firm A's console is less tech-
nologically advanced than that of firm B, and firm A knows that if consumers get to
choose between both consoles at the same time, they would choose the console of firm
B. Therefore, firm A's only chance to sell a large number of consoles is to release it at
a different time than firm B. Firm B prefers to release the console at the same time as
firm A to benefit from the hype and blog reviews.
Suppose first that the firms have to commit to a release date in advance. Firms can
choose to release the console either in October or in December. Therefore, while the
game has some dynamic aspect, we can think of the choice of the release date as a
simultaneous move game, represented by the payoff matrix below.
A \ B
October
October
(10, 100)
December (50, 50)
December
(100, 50)
(10, 100)
Transcribed Image Text:Two firms A and B manufacture video game consoles. Firm A's console is less tech- nologically advanced than that of firm B, and firm A knows that if consumers get to choose between both consoles at the same time, they would choose the console of firm B. Therefore, firm A's only chance to sell a large number of consoles is to release it at a different time than firm B. Firm B prefers to release the console at the same time as firm A to benefit from the hype and blog reviews. Suppose first that the firms have to commit to a release date in advance. Firms can choose to release the console either in October or in December. Therefore, while the game has some dynamic aspect, we can think of the choice of the release date as a simultaneous move game, represented by the payoff matrix below. A \ B October October (10, 100) December (50, 50) December (100, 50) (10, 100)
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