Homework: Chapter 12: Game Theory and Business Strategy Save Score: 0.33 of 1 pt
ID: 1162187 • Letter: H
Question
Homework: Chapter 12: Game Theory and Business Strategy Save Score: 0.33 of 1 pt 10 of 15 (15 complete) HW Score: 88.44%, 13.27 of 15 pts Text Question 212 EQuestion Help Amazon faces the other group (Other), which consists of e-book manufacturers other than Amazon, in a game in which the players choose a format (either Amazon's format, AZW, or the other group's format, EPUB), as the profit matrix shows. What are the pure-strategy Nash equilibria if the firms choose their formats simultaneously and are free to choose either format? Is there a mixed-strategy AZW EPUB Determine the pure-strategy Nash equilibria for this game AZW O A. The Nash equilibrium is for Amazon and the other group to select the AZW format The Nash equilibria are for Amazon and the other group to select the same format This game has no Nash equilibria. The Nash equilibria are for Amazon and the other group to select different formats Amazon B ?C D. EPUB O E. The Nash equilibrium is for Amazon and the other group to select the EPUB format Determine the mixed-strategy Nash equilibrium for this game. The mixed-strategy Nash equilibrium is for Amazon to select the AZW format with probability Aand for the other group to select the AZW format with probability 8o(Enter your responses rounded to two decimal places.)Explanation / Answer
Circled choices below suggest that they both select the same set of strategy in the Nash equilibrium. Hence B is correct
Let Other select AZW with a probability p and select EPUB with a probability 1 - p
Expected payoffs for Amazon should be same under both strategies
3p -2(1-p) = -2p + 2(1-p)
3p - 2 + 2p = -2p + 2 -2p
5p + 4p = 4
p = 0.44
Let Amazon select AZW with a probability q and select EPUB with a probability 1 - q
Expected payoffs for Other should be same under both strategies
4q -2(1-q) = -2q + 5(1-q)
4q - 2 + 2q = -2q + 5 -5q
13q = 7
q = 0.54
Hence it is mixed strategy NE that Amazon selects AZW with probability 0.54 and Other select AZW with probability 0.44
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