Business, 16.04.2020 04:43 proutyhaylee

Two firms compete in selling file-encryption software. Because both firms use the same encryption standard, files encrypted by one firm's software can be read by the other's, which is an advantage for consumers. Nonetheless, Firm 1 has a much larger market share because it entered the market earlier and its software has a better user interface. Both firms are now considering an investment in a new encryption standard. The two firms can either invest or not invest in this new standard. Resulting profit is given by the payoff matrix to the right. Suppose Firm 1 decides first whether to invest and then Firm 2 decides after learning of Firm 1's decision. What is the Nash equilibrium? The Nash equilibrium when Firm 1 moves first is for A. Firm 1 to invest and Firm 2 to invest. B. Firm 1 to not invest and Firm 2 to invest. C. Firm 1 to not invest and Firm 2 to not invest. D. Firm 1 to invest and Firm 2 to not invest. E. none of the above. Instead, suppose that Firm 2 decides first whether to invest. What is the Nash equilibrium in this instance? The Nash equilibrium when Firm 2 moves first is for A. Firm 2 to investinvest and Firm 1 to investinvest. B. Firm 2 to invest and Firm 1 to not invest. C. Firm 2 to not investnot invest and Firm 1 to not investnot invest. D. Firm 2 to not invest and Firm 1 to invest. E. none of the above.

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Two firms compete in selling file-encryption software. Because both firms use the same encryption st...

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