7. High-tech Industry

Synergy and Dynaco are the only two firms in a specific high-tech industry. They face the following payoff matrix as they decide upon the size of their research budget:

	Synergy's Decision
Large Budget	Small Budget
Dynaco's Decision	Large Budget	$30 million,$20 million	$70 million,$0
Small Budget	$0,$30 million	$50 million,$40 million

If Synergy believes Dynaco will go with a large budget, it will choose a budget. If Synergy believes Dynaco will go with a small budget, it will choose a budget. Therefore, Synergy a dominant strategy.

If Dynaco believes Synergy will go with a large budget, it will choose a budget. If Dynaco believes Synergy will go with a small budget, it will choose a budget. Therefore, Dynaco a dominant strategy.

True or False: There is a Nash equilibrium for this scenario. (Hint: Look closely at the definition of Nash equilibrium.)

True

False