Suppose that Mozilla and Microsoft each develop their own versions of an amazing
ID: 1110540 • Letter: S
Question
Suppose that Mozilla and Microsoft each develop their own versions of an amazing new Web browser that allows advertisers to target consumers with great precision. Also, the new browser is easier and more fun to use than existing browsers. Each firm is trying to decide whether to sell the browser or to give it away The payoff matrix shows each firm's economic profit in millions of dollars. Microsoft's strategies (red squares) $300 - $200 Fill in the four blank headings in the matrix to indicate whether each payoff is associated with charging for the browser or giving it away for free. Choose the correct statement. $300 $900 Firefox's strategies (blue squares) Free $900 $500 A. The equilibrium of this game is that one firm gives the browser Charge away for free and the other sells it This game has no equilibrium. 0 B. - $200 $500 C. The equilibrium of this game is that both firms give the browser away for free D. The equilibrium of this game is that both firms sell the browser.Explanation / Answer
Firefox Best Response
BRF(Free) =Free
BRF(Charge) = Free
Microsoft’s Best Response
BRM(Free) =Free
BRM(Charge) = Free, Since free is the dominant strategy for both Firefox and Microsoft. The Nash
Equilibrium of this game is both the firms give the borrower away for free. So correct option is C.