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Can I get some help on this question? The Korea and China are competing for a next generation computer chip market. Samsung and Changxin are
Can I get some help on this question?
The Korea and China are competing for a next generation computer chip market. Samsung and Changxin are the companies that compete for this market. Since developing the new generation computer chip requires a huge R&D investment, the payoff matrix is given as follows: Payoff (Profit) matrix (Samsung, Changxin) without government's subsidies ($million) Production (by Changxin) No production (by Changxin) Production (by Samsung) (-10,-40) (30,0) No production (by Samsung) (0,20) (0,0) Answer the following questions based on the above payoff matrix. Now, Chinese government considers about subsidizing Changxin's R&D to produce this next generation computer chip. The subsidy will change the profits of Changxin in the above table. The goal of Chinese government is to make sure the entrance of Changxin into the market. To do this, the R&D subsidy should be higher than a certain level. What is the minimum of this critical level of R&D subsidy of the Chinese government to ensure the entry of Changxin into this new computer chip market? The critical level of the Chinese government's R&D subsidy = Given that the Chinese government succeeds in guaranteeing the entrance of Changxin into the market by providing the critical level of R&D subsidy (found above) to Changxin, the net gain for China from the next generation computer market (the Chinese net gain = Changxin's Gross Profit - Government Subsidy Costs) =Step by Step Solution
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