two firms (form A and firm C) compete for customers and are considering improving their operations. Each firm has one of two options: (i) to invest in a new Al - powered recommendation system or (ii) to invest in upgrading their Data Management Systems. Investing in the recommendation system carries a cost of 20 for each firm and generates a benefit of vor equal to 0 bgut as this system is patentable only one firm could reap this reward: if both firms invest in the recommendation system then each gets on expectation v/2 while if only one invests it receives v. Upgrading data Management Systems generates an individual benefit of 20 but also an individual cost that is increasing in the number of firms upgrading: if only one firm upgrades it bears a cost of 10 while if both firms upgrade tehy each incur a cost of 19. Both firms simultaneously decide whether to invest in the recommendation system or upgrade Data Management write is firm R's best response as a function of the parameter v to firm C upgrading its data management system? What is F down he 2x2 payoff matrix of this game. What is firm R's best response as a function of the parameter v to firm C investing in the recommendation system?
two firms (form A and firm C) compete for customers and are considering improving their operations. Each firm has one of two options: (i) to invest in a new Al - powered recommendation system or (ii) to invest in upgrading their Data Management Systems. Investing in the recommendation system carries a cost of 20 for each firm and generates a benefit of vor equal to 0 bgut as this system is patentable only one firm could reap this reward: if both firms invest in the recommendation system then each gets on expectation v/2 while if only one invests it receives v. Upgrading data Management Systems generates an individual benefit of 20 but also an individual cost that is increasing in the number of firms upgrading: if only one firm upgrades it bears a cost of 10 while if both firms upgrade tehy each incur a cost of 19. Both firms simultaneously decide whether to invest in the recommendation system or upgrade Data Management write is firm R's best response as a function of the parameter v to firm C upgrading its data management system? What is F down he 2x2 payoff matrix of this game. What is firm R's best response as a function of the parameter v to firm C investing in the recommendation system?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:two firms (form A and firm C) compete for customers and are considering improving their operations. Each firm has one
of two options: (i) to invest in a new Al - powered recommendation system or (ii) to invest in upgrading their Data
Management Systems. Investing in the recommendation system carries a cost of 20 for each firm and generates a
benefit of vor equal to 0 bgut as this system is patentable only one firm could reap this reward: if both firms invest in
the recommendation system then each gets on expectation v/2 while if only one invests it receives v. Upgrading data
Management Systems generates an individual benefit of 20 but also an individual cost that is increasing in the number
of firms upgrading: if only one firm upgrades it bears a cost of 10 while if both firms upgrade tehy each incur a cost of
19. Both firms simultaneously decide whether to invest in the recommendation system or upgrade Data Management
write is firm R's best response as a function of the parameter v to firm C upgrading its data management system? What
is F down he 2x2 payoff matrix of this game. What is firm R's best response as a function of the parameter v to firm C
investing in the recommendation system?
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