Kiplinger and Intuit are two rival firms in the tax- software industry. Each faces a choice for the coming year between developing a simple tax- advice program or a comprehensive one. The matrix below shows how the profits of each firm depend on the combination of choices made by the two.

a. Identify the Nash equilibria of this game, if any exist.
b. Suppose a uniquely talented programmer exists who would enable her employer to bring its product to market before the employer’s rival even had a chance to choose its development strategy. Either firm’s failure to hire this programmer will result in her being hired by the other. If the programmer’s decision rule is to work for the highest bidder and both firms are rational profit-maximizers, for whom will the programmer work, and how much will she bepaid?

  • CreatedDecember 12, 2014
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