Managerial Economics 2nd Edition by William Boyes

تمرين 7

Two firms are involved in developing a new technology that will allow consumers to provide the most incredibly clear picture yet devised on all video sources. Given the risks, compatibility of the technologies is very important. Firm Digi- View is far advanced in developing its RemoteHD technology. WebView has been expanding into the Internet arena with its incompatible product, WebHD. The two companies agree that if they both adopt the same technology, they each may gross $200M from the developing industry. If they adopt different technologies, consumers will purchase neither product, leading to a gross of $0. Retooling one's factory to make the competing (nonproprietary) technology would cost WebView $100M and DigiView $250M. Their production decisions must be made simultaneously. Set up the above scenario as a normal form (simultaneous) game.
What is the equilibrium outcome?