Question
Consider the following game played by two Hollywood studios, Disney and Warner Bros. Disney is choosing when to release the new installment of their 'Marvel
Consider the following game played by two Hollywood studios, Disney and Warner Bros. Disney is choosing when to release the new installment of their 'Marvel Cinematic Universe' franchise, while WB is deciding on a release date for the new film in their 'DC Extended Universe' series. Each is considering three possible release dates: one in May (around Memorial Day), one in July (around Independence Day), and one in September (around Labor Day). Each studio's goal is to maximize the profit obtained from its film release. Suppose market research estimates suggest the following: If both Disney and WB choose to release their respective films in May, the 'Marvel' movie will net Disney $200 million and the 'DC' movie will give WB a profit of $125 million. If both companies open their movies in July, Disney turns a profit from its 'Marvel' sequel of $150 million and WB makes $100 million from its 'DC' release. If Disney and WB both set a September release date, their respective profits will be $100 million and $50 million. If Disney picks a May opening when WB does not, its 'Marvel' film will turn a profit of $350 million. If Disney picks a July opening and WB does not, Disney's profit will be $250 million. If Disney opens its film in September when WB does not, Disney will make $150 million. If WB chooses a May opening when Disney does not, its 'DC' movie will turn a profit of $200 million. If WB chooses a July opening when Disney does not, WB's profit will be $150 million. If WB opens its film in September when Disney does not, WB will make $75 million.
a) What would you predict as the most likely outcome of the game, assuming both studios' managers are rational, understand the game, and expect the rival to do so too? Explain. b) What is the likely outcome of this game if each studio fears the rival might be irrational or not understand the game and, for that reason, chooses to play a 'maximin' strategy?
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