P-TV and QRS-TV are trying to decide whether to air a sit-com or
a reality show in a given time slot. Viewers like both sit-coms and
reality shows, but sitcoms are more expensive to produce than
reality shows since real actors need to be hired. QRS-TV makes its
decision first, and then P-TV observes that choice before making
its decision. Both stations know all of the information in the
decision tree below.
P-TV will air a sit-com:
Select one:
a. only if QRS-TV is also airing a sit-com.
b. only if QRS-TV is airing a reality show.
c. no matter what QRS-TV does.
d. never.
Homework Answers
The answer is option d. P-TV will never air a sit-com. The nash-equilibrium will be QRS-TV chooses Reality then P-TV will also choose Reality. At this point no one will diverge from their decisions.
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