Consider the Following Innovation Game: Firm a Must Decide Whether

question 1

Multiple Choice

Consider the following innovation game: Firm A must decide whether or not to introduce a new product.Firm B must decide whether or not to clone firm A's product.If firm A introduces and B clones,then firm A earns $2 and B earns $15.If A introduces and B does not clone,then A earns $8 and B earns $1.If firm A does not introduce,both firms earn profits of 0.Which of the following is true?

• A) The subgame perfect Nash equilibrium profits are ($2, 15).
• B) The subgame perfect Nash equilibrium profits are ($8, 1).
• C) It is not in A's interest to introduce.
• D) None of the preceding answers is correct.

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