Refer to the payoff matrix below.

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 €œwin€ from moving first turn out to be a big loss, whereas the €œloss€ of being preempted turn out to be a blessing in disguise?

Transcribed Image Text:

Firm A Bulld alrcraft Don't build -$10 $10 $25 $25 Firm B Don't build Bulld aircraft