Firm A

-Firms A and B can conduct research and development (R&D) or not conduct it. R&D is costly but can increase the quality of the product and increase sales. The payoff matrix is the economic profits of the two firms and is given above, where the numbers are millions of dollars. Firm A's best strategy is to
A) conduct R&D regardless of what B does.
B) not conduct R&D regardless of what B does.
C) conduct R&D only if B does not conduct R&D.
D) conduct R&D only if B conducts R&D.

Question

Firm A
 
-Firms A and B can conduct research and development (R&D) or not conduct it. R&D is costly but can increase the quality of the product and increase sales. The payoff matrix is the economic profits of the two firms and is given above, where the numbers are millions of dollars. Firm A's best strategy is to
A) conduct R&D regardless of what B does. 
B) not conduct R&D regardless of what B does. 
C) conduct R&D only if B does not conduct R&D. 
D) conduct R&D only if B conducts R&D.

Quizplus · Accepted Answer

Firm A's best strategy is to conduct R&D regardless of what B does because, in every scenario where A conducts R&D, their payoff is higher compared to not conducting R&D, regardless of B's choice.

Firm a -Firms a and B Can Conduct Research and Development (R&D)