Question

Two firms are involved in developing a new technology that will allow consumers to provide the most incredibly clear picture yet devised on all video sources. Given the risks, compatibility of the technologies is very important. Firm Digi View is far advanced in developing its Remote HD technology. Web View has been expanding into the Internet arena with its incompatible product, Web HD. The two companies agree that if they both adopt the same technology, they each may gross $200M from the developing industry. If they adopt different technologies, consumers will purchase neither product, leading to a gross of $0. Retooling one's factory to make the competing (nonproprietary) technology would cost Web View $100M and Digi View $250M. Their production decisions must be made simultaneously. Set up the above scenario as a normal form (simultaneous) game.
What is the equilibrium outcome?



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  • CreatedSeptember 27, 2014
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