3. Refer to the payoff matrix below. LO8

Assuming this is a sequential game with no collusion, what is the outcome if Firm A moves first to build a new type of commercial aircraft? Explain why first-mover strategies in the real world are only as good as the profit projections on which they are based. How could a supposed “win” from moving first turn out to be a big loss, whereas the “loss” of being preempted turn out to be a blessing in disguise?

Transcribed Image Text:

Firm B Don't build Build aircraft $10 Build aircraft Firm A Don't build -$10 B 0 $25 C $25 D 0 0 0