-Two Software Firms Have Developed an Identical New Software Application

question 142

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 the Nash equilibrium of the game?

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

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Definitions:

Specific Undertaking

A Specific Undertaking refers to a particular project or task that is distinctly defined within the scope of work or agreement.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task, which could be a new project or any other business activity.

Countertrade Deals

Transactions where goods and services are exchanged directly for other goods and services, without using currency as an intermediary.

Heavy Debt Burdens

Refers to situations where individuals, companies, or countries owe large amounts of money, making it difficult to manage finances or invest for the future.