In the Tech industry, Tesla and Toyota are two famous brands and compete. Recently, both firms are competing to raise funds from the likes of Soft banks and Yes Bank. Tesla is in talks to raise $600 million and speed up its acquisition plans while Toyota plans to secure at least $200 million in a new funding round this year. Since both firms are going the same investors, if both approach the Soft banks then Toyota is guaranteed to raise $200 million while Tesla will receive $400 million. If both approach Yes Bank, then Toyota will definitely receive $600 million while Tesla will get $400 million. However, if Toyota approaches Yes Bank while Tesla pursues Soft bank, they are guaranteed investments worth $400 million and $800 million.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

In the Tech industry, Tesla and Toyota are two famous brands and compete. Recently, both firms are competing to raise funds from the likes of Soft banks and Yes Bank. Tesla is in talks to raise $600 million and speed up its acquisition plans while Toyota plans to secure at least $200 million in a new funding round this year. Since both firms are going the same investors, if both approach the Soft banks then Toyota is guaranteed to raise $200 million while Tesla will receive $400 million. If both approach Yes Bank, then Toyota will definitely receive $600 million while Tesla will get $400 million. However, if Toyota approaches Yes Bank while Tesla pursues Soft bank, they are guaranteed investments worth $400 million and $800 million. On the other hand, if Toyota pursues Soft Bank while Tesla is interested in securing Yes bank’s funding, they each secure $600 million.

a) Solve the Nash equilibrium for the above scenario as a simultaneous game.

b) Now model the above scenario as a sequential game where Toyota makes the first move and find the Nash for this game.

Expert Solution
steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education