What can either of these firms do to make their best, most-preferred outcome more likely
Consider the following hypothetical case. Only Pfizer and a competitor, Astra-Zeneca, have
the ability to develop a COVID-19 vaccine. Both have access to the same two promising
vaccine technologies, but each company must choose one to invest in. While each firm
could develop a vaccine on its own, the problem is that the fixed cost of production and risk
are very high. They are therefore considering coordinating their actions through a strategic
alliance where they join forces and share cost and revenue equally. Analyse the interaction
between the two firms using
and analyse it for Nash equilibrium. What can either of these firms do to make their best,
most-preferred outcome more likely
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