HBO and Showtime are both considering producing a new television show. They could produce either a romantic comedy or a historical drama. The profits are illustrated in the following payoff matrix:

Use the information provided to identify whether each of the following statements is True or False. 

a. If HBO chooses to produce a romantic comedy, then Showtime’s best response is to produce a historical drama. 

b. HBO’s best response is to always produce a historical drama. 

c. Showtime’s best response is to always produce a romantic comedy.  

Transcribed Image Text:

HBO produces romantic comedy HBO produces historical drama Showtime produces romantic comedy HBO receives $19 million profit Showtime receives $13 million profit HBO receives $30 million profit Showtime receives $14 million profit Showtime produces historical drama HBO receives $22 million profit Showtime receives $10 million profit HBO receives $25 million profit Showtime receives $8 million profit Stevenson/Wolfers, Principles of Economics, 1e, © 2020 Worth Publishers