question archive 1) The market for an international product is such that the product must be developed first, and there is a fixed development cost of $R for the incumbent and sole developer
1) The market for an international product is such that the product must be developed first, and there is a fixed development cost of $R for the incumbent and sole developer
Subject:ManagementPrice: Bought3
1) The market for an international product is such that the product must be developed first, and there is a fixed development cost of $R for the incumbent and sole developer. However, there is another firm (entrant) who successfully imitates the product without incurring any development cost. This other firm can only imitate and not develop. So incumbent moves first and decides whether or not to develop a product, and upon observing this, the entrant, decides whether or not he should imitate the product. If the incumbent develops the product and the entrant imitates him, the incumbent pays development cost, $R, plus $3 and the entrant pays nothing. The incumbent gets $15 in revenues and the entrant $6. If the incumbent develops the product and the entrant does not imitate him, the incubent gets a revenue of $15 and pays the development cost of $R. If the entrant does not imitate, she gets $0. If the incumbent does not develop the product and the entrant does not develop a product, they get $9 and $0 respectively. (a) Depict the game as an extensive form game (Head p.164). i. What are the Nash Equilibria for this game (Head p.159)? Hint: the Nash Equilibria (or lack thereof) are a function of $RE [0,06). (b) Assume the game is played simultaneously. Draw the game in a payoff table as in Head p. 160. i. What are the Nash Equilibria for this game? Hint: the Nash Equilibria (or lack thereof) are a function of $RE [(. co).
