Question

ColTech and HotProduct are technology firms developing a new video projection player. Each firm must decide whether to use Format 1 or Format 2, which are not compatible with each other. The payoffs from each strategy combination are shown below. The frst number in each pair is CoolTech's expected profit, the second is HotProduct's expected profit. All numbers are in millions of dollars Format 1-HotProductFormat 2 $3 $5 If each firm chooses a format based on its expected profit. CoolTech will choose ▼| , and HoProduct will choose V. Thus, the formats chosen will be $6 $6 This type of game is called $3 $5 O A. a Prisoner's Dilemma. O B. Tweedle Dee-Tweedle Dum. Oc. aTit-for-Tat. OD. Battle of the Sexes $2 $2

Answer 1

If each firm chooses a format based on Expected profit. Cool tech will choose Format 1 and Hotproduct will choose Format 2.

Thus, the format chosen will be Incompatiable.

This type of game is called

A. A. Prisoner's dilemma.

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