-Two software firms have developed an identical new software application. They are debating whether to give the new app away free and then sell add-ons or sell the application at $30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is Firm 1's best strategy?
A) Give away the application regardless of what Firm 2 does.
B) Sell the application at $30 a copy regardless of what Firm 2 does.
C) Give away the application only if Firm 2 sells the application.
D) Give away the application only if Firm 2 gives away the application.

Question

-Two software firms have developed an identical new software application. They are debating whether to give the new app away free and then sell add-ons or sell the application at $30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is Firm 1's best strategy?
A) Give away the application regardless of what Firm 2 does. 
B) Sell the application at $30 a copy regardless of what Firm 2 does. 
C) Give away the application only if Firm 2 sells the application. 
D) Give away the application only if Firm 2 gives away the application.

Quizplus · Accepted Answer

Firm 1's best strategy is to give away the application regardless of what Firm 2 does, as this strategy maximizes their profit in both scenarios.

-Two Software Firms Have Developed an Identical New Software Application