3. Suppose that Wal-World and Tarbo are independently deciding whether to implem

Question

3. Suppose that Wal-World and Tarbo are independently deciding whether to implement a new bar code technology or use the existing bar code. It is less costly for their suppliers to use one system and the following payoff matrix shows the profits per year for each company resulting from the interaction of their strategies. Wal-World ams $4 billion tVal."'orld earns $I billion Existing bar code technolopy Tarbo earn: $ billion Tarbo earns S2 billion Wal-World earns $2 billion Wal-World New bar code technolory eams $3 billion Tarbo earns S1 billion Tarbo earns S4 billion

Explanation / Answer

a. The walworld will lose profit with a dominant strategy. Existing bar code technology that they made 4 billion against Tarbo's 3 billion. With the new bar code technology both firms will be making 3 billion.

b. Tarbo will make loss if they make a dominant strategy. They are making 3 billon with the existing bar code technology against walworld 4 billion.

c. Yes. There is Nash equilibrium in this game. As we can see both the firms are opting the best strategy for both to profit.

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