Suppose AMD Is Considering Cloning Intel's Latest CPU Chip

question 1

Multiple Choice

Suppose AMD is considering cloning Intel's latest CPU chip. If AMD enters Intel's market, Intel can play Mean, expand its output, drop prices, and try to make AMD's profit as small as possible or play Nice by cutting back its output and sharing the market. AMD and Intel both know that after all moves are complete, the time-discounted profits of future chip production in billions of dollars are Intel
Assuming AMD moves first, which of the following is the Nash equilibrium for sequential play?

• A) (In, Nice)
• B) (In, Mean)
• C) (Out, Nice)
• D) (Out, Mean)

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Definitions:

Cause-Effect Relationship

A connection between two events where the first event (the cause) makes the second event (the effect) happen.

Correlation

A statistical measure that describes the extent to which two variables change together, but does not imply causation.

Experimenter Bias

A form of bias introduced by the experimenter whose expectations about the outcome of the experiment can be subtly communicated to the participants.

Dependent Variable

The variable in an experiment that is expected to change in response to manipulations of the independent variable.