Consider the following game between Sony, a manufacturer of video cassette players, and Columbia Pictures, a movie studio. Each firm must decide whether to use the VHS or Beta format - Sony to make video players, Columbia to release its movies for rental or purchase.
Columbia Pictures
Beta VHS
Sony Beta 20, 10 0, 0
VHS 0, 0 10, 20
a) Restrict attention to pure strategies. Does either firm have a dominant strategy? What is (are) the Nash equilibrium (equilibria) of this game?
b) Is there a mixed strategy Nash equilibrium in this game? If so, what is it?