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

question 11

Multiple Choice

Suppose two companies, Macrosoft and Apricot, and 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) . Suppose Apricot makes its decision first, and then Macrosoft makes its decision after seeing Apricot's choice. What will happen if, before Apricot chooses, Macrosoft announces that it is going to develop a touch-screen t-shirt no matter what Apricot does?

• A)Apricot will develop a touch-screen t-shirt, and Macrosoft will not because Macrosoft's threat is not credible.
• B)Macrosoft will develop a touch-screen t-shirt, and Apricot will not because it's not in Apricot's interest to develop a touch-screen t-shirt if Macrosoft also develops one.
• C)Both Apricot and Macrosoft will develop a touch-screen t-shirt because neither company will want to back down.
• D)Neither Apricot nor Macrosoft will develop a touch-screen t-shirt because they will both realize that they are in a no-win situation.

---

Definitions:

Federal Aviation Administration

A United States government agency responsible for regulating all aspects of civil aviation in the U.S.

National Labor Relations Board

An independent U.S. federal agency established in 1935 that enforces U.S. labor law in relation to collective bargaining and unfair labor practices.

Reagan Doctrine

A strategy implemented by the U.S. during the presidency of Ronald Reagan, aimed at diminishing the influence of the Soviet Union globally by supporting anti-communist resistance movements.

Anticommunist Forces

Individuals or groups that oppose communism, often advocating for or engaging in political or military action against communist movements or governments.