Synergy and Dynaco are the only two firms in a specific high-tech industry. They face the following payoff matrix as they decide upon the size of their research budget: Synergy's Decision Large Budget Small Budget Dynaco's Decision Large Budget $20 million, $25 million $15 million, $0 Small Budget $0, $60 million $25 million, $30 million If Synergy believes Dynaco will go with a large budget, it will choose a budget. If Synergy believes Dynaco will go with a small budget, it will choose a budget. Therefore, Synergy a dominant strategy.
Synergy and Dynaco are the only two firms in a specific high-tech industry. They face the following payoff matrix as they decide upon the size of their research budget: Synergy's Decision Large Budget Small Budget Dynaco's Decision Large Budget $20 million, $25 million $15 million, $0 Small Budget $0, $60 million $25 million, $30 million If Synergy believes Dynaco will go with a large budget, it will choose a budget. If Synergy believes Dynaco will go with a small budget, it will choose a budget. Therefore, Synergy a dominant strategy.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Synergy and Dynaco are the only two firms in a specific high-tech industry. They face the following payoff matrix as they decide upon the size of their research budget:
| Synergy's Decision | |||
| Large Budget | Small Budget | ||
| Dynaco's Decision | Large Budget | $20 million, $25 million | $15 million, $0 |
| Small Budget | $0, $60 million | $25 million, $30 million |
If Synergy believes Dynaco will go with a large budget, it will choose a budget. If Synergy believes Dynaco will go with a small budget, it will choose a budget. Therefore, Synergy a dominant strategy.
If Dynaco believes Synergy will go with a large budget, it will choose a budget. If Dynaco believes Synergy will go with a small budget, it will choose a budget. Therefore, Dynaco a dominant strategy.
True or False: There is a Nash equilibrium for this scenario. (Hint: Look closely at the definition of Nash equilibrium.)
True
False
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