Two firms, BuildCo and DesignFirm, must choose a single software standard for a joint project. Their payoffs for each combination of choices are shown in the matrix below, with BuildCo's payoff listed first in each pair. A stable outcome is one where neither firm has an incentive to change its choice, assuming the other firm's choice remains the same. Given this, which outcome represents the most efficient stable equilibrium for the project as a whole?
| DesignFirm: Software A | DesignFirm: Software B | |
|---|---|---|
| BuildCo: Software A | (4, 2) | (0, 0) |
| BuildCo: Software B | (0, 0) | (3, 5) |
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Two firms, BuildCo and DesignFirm, must choose a single software standard for a joint project. Their payoffs for each combination of choices are shown in the matrix below, with BuildCo's payoff listed first in each pair. A stable outcome is one where neither firm has an incentive to change its choice, assuming the other firm's choice remains the same. Given this, which outcome represents the most efficient stable equilibrium for the project as a whole?
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