-Two Software Firms Have Developed an Identical New Software Application

question 65

Multiple Choice

-Two software firms have developed an identical new software application. They are debating whether to give the new app away 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 Firm 1's best strategy?

• A) Give away the application regardless of what Firm 2 does.
• B) Sell the application at $30 a copy regardless of what Firm 2 does.
• C) Give away the application only if Firm 2 sells the application.
• D) Give away the application only if Firm 2 gives away the application.

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Definitions:

Young-Helmholtz Theory

A theory of color vision that proposes three types of color receptors in the eye, responsible for the perception of red, green, and blue.

Fovea

A small depression in the retina of the eye where visual acuity is highest due to the high concentration of cones, which are responsible for color vision.

Visual Sensitivity

The ability of the visual system to detect and respond to small differences or changes in the visual environment.

Opponent-Process Theory

The theory that opposing retinal processes (red-green, blue-yellow, white-black) enable color vision. For example, some cells are stimulated by green and inhibited by red; others are stimulated by red and inhibited by green.