Consider the following innovation game: Firm A must decide whether or not to introduce a new product. Firm B must decide whether or not to clone firm A's product. If firm A introduces and B clones, then firm A earns $1 and B earns $10. If A introduces and B does not clone, then A earns $10 and B earns $2. If firm A does not introduce, both firms earn profits of 0. Which of the following is true?
A) The subgame perfect Nash equilibrium profits are ($10, $2).
B) It is not in A's interest to introduce.
C) Firm A does not care if B clones.
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

The Answer of Consider the following innovation game: Firm A must decide whether or not to introduce a new product. Firm B must decide whether or not to clone firm A's product. If firm A introduces and B clones, then firm A earns $1 and B earns $10. If A introduces and B does not clone, then A earns $10 and B earns $2. If firm A does not introduce, both firms earn profits of 0. Which of the following is true?
A) The subgame perfect Nash equilibrium profits are ($10, $2).
B) It is not in A's interest to introduce.
C) Firm A does not care if B clones.
D) None of the answers is correct.

Consider the Following Innovation Game: Firm a Must Decide Whether