In the Tech industry, Tesla and Toyota are two famous brands and compete. Recently, both firms are
Question:
In the Tech industry, Tesla and Toyota are two famous brands and compete. Recently, both firms are competing to raise funds from the likes of Soft banks and Yes Bank. Tesla is in talks to raise $600 million and speed up its acquisition plans while Toyota plans to secure at least $200 million in a new funding round this year. Since both firms are going the same investors, if both approach the Soft banks then Toyota is guaranteed to raise $200 million while Tesla will receive $400 million. If both approach Yes Bank, then Toyota will definitely receive $600 million while Tesla will get $400 million. However, if Toyota approaches Yes Bank while Tesla pursues Soft bank, they are guaranteed investments worth $400 million and $800 million. On the other hand, if Toyota pursues Soft Bank while Tesla is interested in securing Yes bank’s funding, they each secure $600 million.
a) Solve for Nash equilibrium/ equilibria for the above scenario as a simultaneous game.
b) Now model the above scenario as a sequential game where Toyota makes the first move and find the Nash for this game.
Expert Answer:
a The payoff table shows that Tesla needs to approach Yes Bank for the fundi... View the full answer
