Two computer firms, A and B, are planning to market network systems for office information management. Each
Question:
a. If both firms make their decisions at the same time and follow maximin (low-risk) strategies, what will the outcome be?
b. Suppose that both firms try to maximize profits, but that Firm A has a head start in planning and can commit first. Now what will be the outcome? What will be the outcome if Firm B has the head start in planning and can commit first?
c. Getting a head start costs money. (You have to gear up a large engineering team.) Now consider the two-stage game in which, first, each firm decides how much money to spend to speed up its planning, and, second, it announces which product (H or L) it will produce. Which firm will spend more to speed up its planning? How much will it spend? Should the other firm spend anything to speed up its planning? Explain.
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