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3. A Japanese electronics company and a U.S. electronics company are both considering the development of a new graphene superconductor. If both companies develop the
3. A Japanese electronics company and a U.S. electronics company are both considering the development of a new graphene superconductor. If both companies develop the superconductor, then they will share the market and each will lose $10 billion. If only one company works on the superconductor, that company will make $100 billion profit. If neither develops the superconductor, then each company will make $0 profit. In addition to the above revenues for selling the superconductor, the Japanese government offers the Japanese company a $15 billion subsidy (grant) to develop the superconductor. (a) (10 points) Formulate a two-person game by stating the strategies for the two companies and giving the payoff matrix that includes the subsidy. Include opportunity costs. (b) (10 points) Find all Nash equilibria, if any, for the game of (a). ANSWER (a) Payoff matrix with strategies: (b) NE = 3. A Japanese electronics company and a U.S. electronics company are both considering the development of a new graphene superconductor. If both companies develop the superconductor, then they will share the market and each will lose $10 billion. If only one company works on the superconductor, that company will make $100 billion profit. If neither develops the superconductor, then each company will make $0 profit. In addition to the above revenues for selling the superconductor, the Japanese government offers the Japanese company a $15 billion subsidy (grant) to develop the superconductor. (a) (10 points) Formulate a two-person game by stating the strategies for the two companies and giving the payoff matrix that includes the subsidy. Include opportunity costs. (b) (10 points) Find all Nash equilibria, if any, for the game of (a). ANSWER (a) Payoff matrix with strategies: (b) NE =
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