Nintendo and Sony Playstation are each planning to introduce one new game into the market. Each is considering three different kinds of games: an urban action game like Grand Theft Auto, an adventure game like Tomb Raiders, or a strategy game like Sim City. The table shows each firm's profits (Sony's profit first) in millions of dollars:
(a) Assuming the firms act independently, find the equilibrium outcome. Briefly, explain your answer. Is this game an example of the prisoner's dilemma?
(b) Nintendo knows for a fact that Sony will not decide on its new project for four months As CEO of Nintendo, what would you do immediately based on the analysis above?
(c) If the firms were free to coordinate their decisions, what agreement (and actions) would they take? Explain briefly.

Question

Nintendo and Sony Playstation are each planning to introduce one new game into the market. Each is considering three different kinds of games: an urban action game like Grand Theft Auto, an adventure game like Tomb Raiders, or a strategy game like Sim City. The table shows each firm's profits (Sony's profit first) in millions of dollars:
  (a) Assuming the firms act independently, find the equilibrium outcome. Briefly, explain your answer. Is this game an example of the prisoner's dilemma?
(b) Nintendo knows for a fact that Sony will not decide on its new project for four months As CEO of Nintendo, what would you do immediately based on the analysis above?
(c) If the firms were free to coordinate their decisions, what agreement (and actions) would they take? Explain briefly.

Quizplus · Accepted Answer

The Answer of Nintendo and Sony Playstation are each planning to introduce one new game into the market. Each is considering three different kinds of games: an urban action game like Grand Theft Auto, an adventure game like Tomb Raiders, or a strategy game like Sim City. The table shows each firm's profits (Sony's profit first) in millions of dollars:
  (a) Assuming the firms act independently, find the equilibrium outcome. Briefly, explain your answer. Is this game an example of the prisoner's dilemma?
(b) Nintendo knows for a fact that Sony will not decide on its new project for four months As CEO of Nintendo, what would you do immediately based on the analysis above?
(c) If the firms were free to coordinate their decisions, what agreement (and actions) would they take? Explain briefly.

Nintendo and Sony Playstation Are Each Planning to Introduce One