Question: Consider the payoff matrix at the right, in which Firm 1 and Firm 2 seek to choose between product Format A and Format B, under

Consider the payoff matrix at the right, in which Firm 1 and Firm 2 seek to choose between product Format A and Format B, under the assumption that there are network effects. Will they desire to produce and sell compatible product formats?

Firm 2's Format $2 million $5 million E$3 million $5 million $4 million $3 million $4 million $2 million

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