Suppose Two Companies, Macrosoft and Apricot, Are Considering Whether to Develop

question 134

Multiple Choice

Suppose two companies, Macrosoft and Apricot, are considering whether to develop a new product, a touch-screen t-shirt. The payoffs to each of developing a touch-screen t-shirt depend upon the actions of the other, as shown in the payoff matrix below (the payoffs are given in millions of dollars) .   
If Macrosoft and Apricot make their decision at the same time, then which of the following statements is correct?

• A)The only Nash equilibrium is that both develop a touch-screen t-shirt.
• B)The only Nash equilibrium is that neither develops a touch-screen t-shirt.
• C)The game does not have a Nash equilibrium.
• D)The game has more than one Nash equilibrium.

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Definitions:

Ignore Taxes

A financial analysis assumption where tax implications are disregarded to simplify the calculation.

Initial Cost

The initial expenditure associated with purchasing an asset or starting a project, including setup, implementation, and acquisition costs.

CCA Class

Stands for Capital Cost Allowance Class, which is a Canadian tax categorization for depreciation of tangible and intangible assets.

Net Working Capital

A financial metric representing the difference between a company's current assets and its current liabilities.