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12 February, 05:14

Synergy and Dynaco are the only two firms in a specific high-tech industry. They face the following payoff matrix as they decide upon the size of their research budget: Synergy's Decision Large Budget Small Budget Dynaco's Decision Large Budget $20 million, $25 million $15 million, $0 Small Budget $0, $60 million $25 million, $30 million If Synergy believes Dynaco will go with a large budget, it will choose a budget. If Synergy believes Dynaco will go with a small budget, it will choose a budget. Therefore, Synergy a dominant strategy. If Dynaco believes Synergy will go with a large budget, it will choose a budget. If Dynaco believes Synergy will go with a small budget, it will choose a budget. Therefore, Dynaco a dominant strategy. True or False: There is a Nash equilibrium for this scenario. (Hint: Look closely at the definition of Nash equilibrium.) True False

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  1. 12 February, 06:15
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    Synergy's Decision Large Budget Small Budget Dynaco's Decision Large Budget $20 million, $25 million $15 million, $0 Small Budget $0, $60 million $25 million, $30 million If Synergy believes

    If synergy believes dynaco will go with a large budget that synergy should choose large budget

    If synergy believes dynamo will go with small budget than synergy should go large budget

    Therefore synergy does have dominant strategy

    If Dynaco believes synergy will go with large budget than he will choose large budget and

    If he belies synergy will go small budget than he will also choose small budget

    Dynaco doesnot have dominant strategy

    True, it has Nash equilibrium as (large budget, large budget)
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