Describe the strategy spaces of the players in the following game: Firm A decide

Question

Describe the strategy spaces of the players in the following game:

Firm A decides whether to enter firm B's industry. Frim B observes this decision. If firm A enters, then the two firms simultaneously decide wheter to advertise. Otherwise, firm B alone decides whteher to advertise. With two firms in the market, the firms earn profits of $3 million each if they both advertise and $5 million if they both do not advertise. If only one firm advertises, then it earns $6 million and the other earns $1 million. When firm B is soley in the industry, it earns $4 million if it advertises and $3.5 million if it does not advertise. Frim earns $0 if it does not enter.

Explanation / Answer

The strategy space represents the set of all possible strategies for the particular player. So, here the strategies for A are - {Not enter industry, enter the industry not advertise, enter the industry and advertise }. As for B, the strategies are just Advertise or not. The the payoffs are described - Payoffs are (A,B) A's Strategies -> Not enter Enter not Advt Enter Advt B's strategies Advt (0,4) (1,6) (5,5) Not Advt (0,3.5) (5,5) (6,1) Hope it helps

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.