Consider the following market in which both Apple and Samsung must choose a new platform for their suite of products.The two choices for each firm are either P1 or P2.The timing of the game is as follows.Apple first chooses either P1 or P2.Samsung observes the choice of Apple and then gets to makes its choice of either P1 or P2.The payoffs are as follows.If both firms chose P1 Apple gets 30 and Samsung 10.If Apple chooses P1 and Samsung P2, Apple receives a payoff of 10 and Samsung gets 0.If Apple opts for P2 and Samsung follows this choice with P1, the payoffs are 50 and 10 to Apple and Samsung, respectively.Finally, if Apple chose P2 and Samsung P2, each firm gets 20.In the subgame (credible) equilibria, what are the actions we observe in the equilibrium play of the game?
A)(P1, P1) where the first term in the parentheses is Apple's action and the second is the action of Samsung.
B)(P1, P2)
C)(P2, P1)
D)(P2, P2)
E)(P1, P1) and (P2, P2).

Question

Quizplus · Accepted Answer

Apple will choose P1, and Samsung will choose P1 as well. This is because if Apple chooses P1, Samsung will choose P1 to get a payoff of 10 instead of 0. If Apple chooses P2, Samsung will still choose P1 to get a payoff of 10 instead of 20.

Consider the Following Market in Which Both Apple and Samsung