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Satsume Satsume
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6 years ago
Two firms in a local market compete in the manufacture of cyberwidgets.  Each firm must decide if they will engage in product research to innovate their version of the cyberwidget.  The pay-offs of each firm's strategy is a function of the strategy of their competitor as well.  The pay-off matrix is presented below.



Does either player have a dominant strategy?  Does the game have any Nash equilibria?  What is the maximin strategy of each player in the game?
Textbook 
Microeconomics

Microeconomics


Edition: 8th
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#1
6 years ago
Neither player has a dominant strategy in this game.  There are two Nash equilibria in this game.  One Nash equilibrium is for Firm #1 to Innovate their product while Firm #2 does not.  A second Nash equilibrium is for Firm #2 to innovate their product while Firm #1 does not.  Each player's maximin strategy is to choose the "DO NOT INNOVATE" option.
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