The Wall Street Journal (Lippman, John, “The Producers: ‘The Terminator’ Is Back,” March 8, 2002, A1) reported that Warner Brothers agreed to pay

$50 million for its U.S. distribution rights, plus an additional $50 million in marketing costs, so that it could release Terminator 3 (T-3) in the summer of 2003. It paid this large sum because it did not want another studio to release T-3 on the same Warner Bros.

35 80 90 20 30 20 50 50 July 4 July 18 T-3 Producer July 4 July 18

a. What is the Nash equilibrium to this simultaneousmoves game?

b. Which release dates would have maximized the sum of the profits? Explain.

c. What is the greatest price Warner would have been willing to pay to purchase the distribution rights to T-3? What is the lowest price that T-3’s producer would have been willing to accept to sell the rights? Are there mutually beneficial prices at which the trade takes place?

d. If Warner purchased the distribution rights of T-3, when should it have released the film and when should it have released Matrix 2?

Explain.