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Consider the following game depicting the process of standard setting in high-de¯nition television (HDTV).11 The U.S and Japan must simultaneously decide whether to invest a high or a low value into

Consider the following game depicting the process of standard setting in high-de¯nition television (HDTV).11 The U.S. and Japan must simultaneously decide whether to invest a high or a low value into HDTV research. Each country's payo®s are summarized in Figure 3. (a) Are there any dominant strategies in this game? What is the Nash equilibrium of the game? What are the rationality assumptions implicit in this equilibrium? (b) Suppose now the U.S. has the option of committing to a strategy ahead of Japan's decision. How would you model this new situation? What are the Nash equilibria of this new game? (c) Comparing the answers to (a) and (b), what can you say about the value of commitment for the U.S.? (d) \When pre-commitment has a strategic value, the player that makes that commitment ends up `regretting' its actions, in the sense that, given the rivals' choices, it could achieve a higher payo® by choosing a di®erent action." In light of your answer to (b), how would you comment this statement?

May 16 2020 View more View Less

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