GAME THEORY, Microeconomics, Business Strategy and NASH EQUILIBRIUM;
Firms J and K produce the compact-disc players and compete against one another. Each firm can develop either an economy player (E) or a deluxe player (D). The firms' resulting profits are given by the accompanying payoff table according to the best available market research.
1. Is it possible to make a confident prediction concerning their actions and the outcome? The firms make their decision independently, and each is seeking its own maximum profit. Explain.
2. Assume that firm J has a lead in development and so can move first. Explain what action should J take, and what will be K's response?
3. Discuss what will be the outcome if firm K can move first?