Firm 1 -Two Software Firms Have Developed an Identical New Software Application

question 85

Multiple Choice

Firm 1

-Two software firms have developed an identical new software application. They are debating whether to give the new application away for free and then sell add- ons or sell the application at
$30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is the Nash equilibrium of the game?

• A) Firm 1 will give the application away for free and Firm 2 will sell it at $30.
• B) There is no Nash equilibrium to this game.
• C) Both Firm 1 and 2 will sell the software application at $30 a copy.
• D) Both Firm 1 and 2 will give the software application away for free.

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Definitions:

Northern States

Geographic region consisting of states located in the northern part of a country, often characterized by specific climatic, cultural, or political attributes.

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, indicating how spread out the values are from the mean.

Variance

A measure of the spread between numbers in a dataset, expressing how much the numbers differ from the average value.

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is true, used as a threshold to gauge the strength of the evidence against the null hypothesis.