Two firms compete in selling file-encryption software. Because both firms use the same encryption standard, files...

 

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Two firms compete in selling file-encryption software. Because both firms use the same encryption standard, files encrypted by one firm's software can be read by the other's, which is an advantage for consumers. Nonetheless, Firm 1 has a much larger market share because it entered the market earlier and its software has a better user interface. Firm 2 Both firms are now considering an investment in a new encryption standard. The two firms can either invest or not invest in this new standard. Resulting profit is given by the payoff matrix to the right. Don't invest Invest Suppose Firm 1 decides first whether to invest and then Firm 2 decides after learning of Firm 1's decision. 15 10 Don't invest What is the Nash equilibrium? 15 - 10 The Nash equilibrium when Firm 1 moves first is for Firm 1 O A. Firm 1 to invest and Firm 2 to not invest. 10 Invest O B. Firm 1 to invest and Firm 2 to invest. - 100 20 O C. Firm 1 to not invest and Firm 2 to not invest. O D. Firm 1 to not invest and Firm 2 to invest. O E. none of the above. Instead, suppose that Firm 2 decides first whether to invest. What is the Nash equilibrium in this instance? The Nash equilibrium when Firm 2 moves first is for O A. Firm 2 to invest and Firm 1 to not invest. O B. Firm 2 to not invest and Firm 1 to invest. O C. Firm 2 to invest and Firm 1 to invest. O D. Firm 2 to not invest and Firm 1 to not invest. Two firms compete in selling file-encryption software. Because both firms use the same encryption standard, files encrypted by one firm's software can be read by the other's, which is an advantage for consumers. Nonetheless, Firm 1 has a much larger market share because it entered the market earlier and its software has a better user interface. Firm 2 Both firms are now considering an investment in a new encryption standard. The two firms can either invest or not invest in this new standard. Resulting profit is given by the payoff matrix to the right. Don't invest Invest Suppose Firm 1 decides first whether to invest and then Firm 2 decides after learning of Firm 1's decision. 15 10 Don't invest What is the Nash equilibrium? 15 - 10 The Nash equilibrium when Firm 1 moves first is for Firm 1 O A. Firm 1 to invest and Firm 2 to not invest. 10 Invest O B. Firm 1 to invest and Firm 2 to invest. - 100 20 O C. Firm 1 to not invest and Firm 2 to not invest. O D. Firm 1 to not invest and Firm 2 to invest. O E. none of the above. Instead, suppose that Firm 2 decides first whether to invest. What is the Nash equilibrium in this instance? The Nash equilibrium when Firm 2 moves first is for O A. Firm 2 to invest and Firm 1 to not invest. O B. Firm 2 to not invest and Firm 1 to invest. O C. Firm 2 to invest and Firm 1 to invest. O D. Firm 2 to not invest and Firm 1 to not invest.

Answer rating: 100% (QA)

a The answer is B b The answer is D See the attached Fm 2 Donf in Inret D... View the full answer