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 Large Budget $20 million, $25 million $15 million, $0 Dynaco's Decision Small Budget $0, $60 million $25 million, $30 million If Synergy believes Dynaco will go with a large budget, it will choose a v budget. If Synergy believes Dynaco will go with a small budget, it will choose a v 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 Large Budget $20 million, $25 million $15 million, $0 Dynaco's Decision Small Budget $0, $60 million $25 million, $30 million If Synergy believes Dynaco will go with a large budget, it will choose a v budget. If Synergy believes Dynaco will go with a small budget, it will choose a v budget. Therefore, Synergy a dominant strategy.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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
Large Budget $20 million, $25 million
$15 million, $0
Dynaco's Decision
Small Budget
$0, $60 million
$25 million, $30 million
If Synergy believes Dynaco will go with a large budget, it will choose a v budget. If Synergy believes Dynaco will go with a small budget, it will
choose a v budget. Therefore, Synergy
a dominant strategy.
If Dynaco believes Synergy will go with a large budget, it will choose a v budget. If Dynaco believes Synergy will go with a small budget, it will
choose av budget. Therefore, Dynaco
v a dominant strategy.
True or False: There is a Nash equilibrium for this scenario. (Hint: Look closely at the definition of Nash equilibrium.)
O True
O False
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