s. Problems and Applications Q5 Synergy and Dynaco are the only two firms in a s

Question

s. Problems and Applications Q5 Synergy and Dynaco are the only two firms in a specific high-tech industry. They face the following payoff matrix as they dedde upon the size of their research budget Symergy's Declision Large Budget Small Budget Large Budget $40 miliion, $30 biition$60 million, so Oynace's Decision Small Budget $0, 530 million $50 million, 540 million If Synergy believes Dynaco will go with a large budget, it wll choose aY wilchoose a budget. Therefore, Synergy budget. I, Synergy believes Dynaco wil go with a smal bdget, it havea dominant strategy. If Dynaco believes Synergy will go with a large budget, it will choose a will choose a 1 budget. If Dynaco believes synergy wil go with a small budget, it budget. Ther re, Dynaco True or Faise: There is a Nash equilibrium for this scenario. (Hint: Look closely at the definition of Nash equiibrium.) O True

Explanation / Answer

The answers in order of the blanks are:

1. Large budget

2. Small budget

3. Don't have

Reason:

If Dynaco chooses large budget, Synergy can make higher profit with large budget($ 30 billion). If Dynaco chooses small budget, Synergy can make higher profit with small budget(40 billion). Thus, Synergy has no dominant strategy.

4. Large budget

5. Small budget

6. Don't have

Reason:If Synergy chooses large budget, Dynaco can make higher profit with large budget($40 billion). If Dynaco chooses small budget, Dynaco can make higher profit with small budget($ 50 billion). Thus, Dynaco has no dominant strategy.

hhope this helps! Revert in case of any doubts.

tThanks!

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