Suppose that GM and Ford are each considering whether or not to build a new factory to
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Question:
Suppose that GM and Ford are each considering whether or not to build a new factory to expand car production. The table below shows the profits that each firm makes depending on their decisions about building a new factory.
GM builds | GM does not build | |
Ford builds | GM = $100 million Ford = $100 million | GM = $120 million Ford = $150 million |
Ford does not build | GM = $150 million Ford = $120 million | GM = $140 million Ford = $140 million |
What is the equilibrium outcome (or outcomes) if both firms are trying to maximize their current profits in the table above?
Related Book For
Finance for Executives Managing for Value Creation
ISBN: 978-0538751346
4th edition
Authors: Gabriel Hawawini, Claude Viallet
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