Two Firms in a Local Market Compete in the Manufacture

question 93

Essay

Two firms in a local market compete in the manufacture of cyberwidgets.Each firm must decide if they will offer a warranty or not.The pay-offs of each firm's strategy is a function of their competitor as well.The pay-off matrix is presented below. If firm #1 announces it will offer a warranty regardless of what firm #2 does,is this a credible threat? Why or why not?

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Definitions:

Shy

A personality trait characterized by feelings of nervousness or discomfort in social situations.

Secretive

Characteristic of being inclined to conceal feelings, intentions, or information from others.

Ways of Relating

Patterns or styles of interaction and communication between individuals or groups, influencing relationships and social dynamics.

Superficial Relationships

Relationships characterized by minimal emotional investment and often focused on surface-level interactions.