-The above figure shows the payoff to two computer manufacturers,A and B,deciding the type of computer to be released in a foreign country.If firm A chooses its strategy first,then
A) both firms will release the basic model.
B) both firms will release the advanced model.
C) firm A will release the advanced model, and firm B will release the basic model.
D) firm A will release the basic model, and firm B will release the advanced model.

Question

-The above figure shows the payoff to two computer manufacturers,A and B,deciding the type of computer to be released in a foreign country.If firm A chooses its strategy first,then
A) both firms will release the basic model. 
B) both firms will release the advanced model. 
C) firm A will release the advanced model, and firm B will release the basic model. 
D) firm A will release the basic model, and firm B will release the advanced model.

Quizplus · Accepted Answer

Given that Firm A chooses its strategy first, it will anticipate Firm B's response to its actions. If Firm A releases the basic model, Firm B, aiming to maximize its payoff, will release the advanced model since it gives Firm B a higher payoff (3) compared to releasing the basic model (2). However, if Firm A releases the advanced model, Firm B's best response is to release the basic model, as it gives Firm B a payoff of 2, which is higher than the 1 it would get if it also released the advanced model. Knowing this, Firm A will choose to release the advanced model to secure a payoff of 3 (the highest it can get), anticipating that Firm B will then choose the basic model, leading to the outcome where Firm A releases the advanced model, and Firm B releases the basic model.

-The Above Figure Shows the Payoff to Two Computer Manufacturers,A