Learn Before
Representing a Game with a Payoff Matrix
Analyzing Strategic Incentives in a Payoff Matrix
Two competing technology firms, Firm A (the row player) and Firm B (the column player), are deciding whether to adopt an 'Open Standard' or a 'Proprietary Standard' for their new product. The payoff matrix below shows their potential yearly profits in millions of dollars. The first number in each cell represents the profit for Firm A, and the second represents the profit for Firm B.
| Firm B | |||
| Proprietary Standard | Open Standard | ||
| Firm A | Proprietary Standard | (20, 20) | (50, 5) |
| Open Standard | (5, 50) | (40, 40) | |
Based on this matrix, explain why the outcome where both firms choose 'Open Standard' might be unstable. In your answer, analyze the specific payoffs that create an incentive for at least one of the firms to change its decision.
0
1
Tags
Library Science
Economics
Economy
Introduction to Microeconomics Course
Social Science
Empirical Science
Science
CORE Econ
Related
Two competing firms, Firm 1 (the row player) and Firm 2 (the column player), are deciding whether to launch an aggressive advertising campaign ('Aggressive') or a modest one ('Modest'). The table below shows the resulting profits for each firm based on their combined decisions. The first number in each cell represents the profit for Firm 1, and the second number represents the profit for Firm 2.
Firm 2 Aggressive Modest Firm 1 Aggressive (20, 15) (40, 5) Modest (10, 30) (30, 25) If Firm 1 chooses a 'Modest' campaign, what is Firm 2's best response to maximize its own profit, and what is that resulting profit?
Constructing a Payoff Matrix from a Scenario
The table below represents a game between two players, the Row Player and the Column Player. Match each term to the specific element it describes within this matrix.
Column Player Strategy C Strategy D Row Player Strategy A (3, 9) (2, 8) Strategy B (1, 4) (4, 5) The table below shows the payoffs for a game between a Row Player and a Column Player. The first number in each cell is the Row Player's payoff, and the second is the Column Player's payoff.
Column Player Strategy X Strategy Y Row Player Strategy A (10, 5) (2, 20) Strategy B (8, 15) (1, 3)
Statement: Assuming the Row Player knows that the Column Player will always choose the action that maximizes their own payoff, the Row Player's best choice is Strategy A.Evaluating a Strategic Business Recommendation
Strategic Product Launch Analysis
The table below shows the profits for two competing coffee shops, 'The Daily Grind' (the row player) and 'Brew-Ha-Ha' (the column player), based on their decisions to 'Advertise' or 'Not Advertise'. The first number in each cell is the profit for The Daily Grind, and the second is for Brew-Ha-Ha.
Brew-Ha-Ha Advertise Not Advertise The Daily Grind Advertise (1000, 800) (1500, 600) Not Advertise (700, 1200) (1300, 1100) If The Daily Grind chooses 'Not Advertise' and Brew-Ha-Ha chooses 'Advertise', the resulting profit for The Daily Grind is ____.
You are analyzing the strategic interaction between two firms presented in the payoff matrix below, where the first number in each cell is the Row Player's payoff and the second is the Column Player's. Arrange the following steps in the correct logical order to determine the specific payoff for the Column Player when the Row Player chooses 'Strategy B' and the Column Player chooses 'Strategy X'.
Column Player Strategy X Strategy Y Row Player Strategy A (5, 10) (8, 8) Strategy B (12, 6) (10, 7) Two competing firms, Firm A (the row player) and Firm B (the column player), are simultaneously deciding whether to set a 'High Price' or a 'Low Price' for their product. The payoff matrix below shows the resulting profits (in thousands of dollars) for each firm, with Firm A's profit listed first in each cell.
Firm B High Price Low Price Firm A High Price (100, 100) (20, 120) Low Price (120, 20) (50, 50) Analyze the matrix. Which of the following statements most accurately describes the strategic situation presented?
Analyzing Strategic Incentives in a Payoff Matrix