Suppose two companies, Macrosoft and Apricot, are considering whether to develop a new product, a touch-screen t-shirt. The payoffs to each of developing a touch-screen t-shirt depend upon the actions of the other, as shown in the payoff matrix below (the payoffs are given in millions of dollars).
If Macrosoft and Apricot make their decision at the same time, then which of the following statements is correct?
A)The only Nash equilibrium is that both develop a touch-screen t-shirt.
B)The only Nash equilibrium is that neither develops a touch-screen t-shirt.
C)The game does not have a Nash equilibrium.
D)The game has more than one Nash equilibrium.

Question

Suppose two companies, Macrosoft and Apricot, are considering whether to develop a new product, a touch-screen t-shirt. The payoffs to each of developing a touch-screen t-shirt depend upon the actions of the other, as shown in the payoff matrix below (the payoffs are given in millions of dollars).   
 If Macrosoft and Apricot make their decision at the same time, then which of the following statements is correct?
A)The only Nash equilibrium is that both develop a touch-screen t-shirt. 
B)The only Nash equilibrium is that neither develops a touch-screen t-shirt. 
C)The game does not have a Nash equilibrium. 
D)The game has more than one Nash equilibrium.

Quizplus · Accepted Answer

If Macrosoft develops a touch-screen t-shirt and Apricot does not, then both companies are responding optimally to each other. Similarly, if Macrosoft does not develop a touch-screen t-shirt and Apricot does, then both companies are responding optimally to each other. Thus, these are both Nash equilibria.

Suppose Two Companies, Macrosoft and Apricot, Are Considering Whether to Develop