The table below shows the payoff matrix in the form of short-run profit for two firms,A and B,for two different strategies,investing in new capital or not investing.
-Refer to the payoff matrix above.An industrial spy comes to firm B and claims to know what firm A has decided.How much would this information be worth to firm B?
A) $0.
B) $5 million.
C) $20 million.
D) $50 million.
E) $70 million.

Question

The table below shows the payoff matrix in the form of short-run profit for two firms,A and B,for two different strategies,investing in new capital or not investing. 
-Refer to the payoff matrix above.An industrial spy comes to firm B and claims to know what firm A has decided.How much would this information be worth to firm B?
A) $0. 
B) $5 million. 
C) $20 million. 
D) $50 million. 
E) $70 million.

Quizplus · Accepted Answer

If firm B knows firm A's decision, it can choose the best response to maximize its payoff. However, without the specific payoff matrix, we cannot determine the exact value of the information. Generally, the value of perfect information is the difference between the expected payoff with and without the information. If the payoff matrix is symmetric or if firm B's best response doesn't change with firm A's decision, the information might be worth $0.

The Table Below Shows the Payoff Matrix in the Form