contestada

Two firms compete in a declining industry. Each firm has three possible choices: 1) exit the industry immediately (and gets a payoff of 0); 2) exit at the end of this quarter; 3) exit at the end of next quarter. Each quarter, if both firms are operating, each incurs a payoff of -1; if a firm operates alone, it yields a payoff of 2.

Respuesta :

Answer:

Explanation:

If one of the decides to exit, then its payoff will be 0. Each quarter the two firms operate incur each a loss which is −1, and any quarter that one of the firm operates alone yields it a payoff of 2. For instance , if firm 1 decide to leave by the end of this current quarter while firm 2 decide to leave by the end of the next quarter, then the payoffs will be (−1, 1). This is so because each firms lose −1 in the first quarter and firm 2 gains 2 in the next quarter. Also. Since the payoff for the two firm is the addition of its quarterly payoffs, the payoff to second firm( firm 2) will be 2 − 1 = 1. Also, suppose first firm (firm 1) chooses to leave immediately after the first quarter and the second (firm 2) continues to operate for two quarters, the outcome is (0, 4).

Otras preguntas