Nintendo and Sony Playstation Are Each Planning to Introduce One

question 43

Essay

Nintendo and Sony Playstation are each planning to introduce one new game into the market. Each is considering three different kinds of games: an urban action game like Grand Theft Auto, an adventure game like Tomb Raiders, or a strategy game like Sim City. The table shows each firm's profits (Sony's profit first) in millions of dollars:
(a) Assuming the firms act independently, find the equilibrium outcome. Briefly, explain your answer. Is this game an example of the prisoner's dilemma?
(b) Nintendo knows for a fact that Sony will not decide on its new project for four months As CEO of Nintendo, what would you do immediately based on the analysis above?
(c) If the firms were free to coordinate their decisions, what agreement (and actions) would they take? Explain briefly.

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Definitions:

U.S. Exports

Goods and services produced in the United States that are sold to other countries.

Foreign Portfolio Investment

Foreign portfolio investment involves holding financial assets from a country outside of the investor's own country.

Net Capital Outflow

The difference between the domestic country's purchases of foreign assets and foreign investments in the domestic country over a specific period.

Net Exports

Net exports are the value of a country's total exports minus the value of its total imports, a key component in calculating a nation's gross domestic product (GDP).