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Honda and Toyota are two car companies that are contemplating whether to invest in a big sum of money to enter the driver Honda and Toyota are two car companies that are contemplating whether

(a) Honda and Toyota are two car companies that are contemplating whether to invest in a big sum of money to enter the driver

(a) Honda and Toyota are two car companies that are contemplating whether to invest in a big sum of money to enter the driverless cars market. If Honda enters the market but Toyota does not, then Honda earns $20 million profits and Toyota earns $0. Similarly, if Toyota enters the market but Honda does not, then Toyota earns $20 million profits and Honda earns $0. If both enter the market, then each suffers $10 million losses. If neither enters, each earns $0. (i) Construct the pay-off matrix for Honda and Toyota indicating the strategies they may choose. Solve for the Nash equilibrium for this game and explain whether this game is a prisoner’s dilemma game. (6 marks) (ii) How would your answer to (i) change if the game become a sequential game where Honda gets to move first. Explain with a tree diagram. 

Feb 06 2020 View more View Less

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