-Intel and AMD are a duopoly that produces CPU chips.Intel and AMD can conduct R&D or they cannot conduct R&D.The table above shows the payoff matrix for the two firms.AMD is playing a tit-for-tat strategy and Intel did not conduct R&D last period.Then,of the following answers,Intel's total profit for the next two periods is the highest if Intel ________ R&D this period and ________ R&D next period.
A) conducts; conducts
B) does not conduct; conducts
C) conducts; does not conduct
D) does not conduct; does not conduct
E) conducts; either conducts or does not conduct because the profit is the same in either case

Question

-Intel and AMD are a duopoly that produces CPU chips.Intel and AMD can conduct R&D or they cannot conduct R&D.The table above shows the payoff matrix for the two firms.AMD is playing a tit-for-tat strategy and Intel did not conduct R&D last period.Then,of the following answers,Intel's total profit for the next two periods is the highest if Intel ________ R&D this period and ________ R&D next period.
A) conducts; conducts 
B) does not conduct; conducts 
C) conducts; does not conduct 
D) does not conduct; does not conduct 
E) conducts; either conducts or does not conduct because the profit is the same in either case

Quizplus · Accepted Answer

If Intel did not conduct R&D last period and AMD is playing a tit-for-tat strategy, AMD will not conduct R&D this period. Intel's best response is to not conduct R&D this period to maximize profit, and then conduct R&D next period to potentially gain a higher profit if AMD continues to follow the tit-for-tat strategy.

-Intel and AMD Are a Duopoly That Produces CPU Chips