Question
Consider the following situation and the associated game. HereAutofoto and PrettyPics are separately considering introducing a new service to their stores: pictures on camera cases
Consider the following situation and the associated game.
HereAutofoto and PrettyPics are separately considering introducing a new service to their stores: "pictures on camera cases" (PCC) or else not introducing it and maintaining the status quo (SQ). Introducing this service requires purchase of a new machine regardless of the number of cases sold. Thus, it is only worthwhile to introduce the service if enough customers are expected to buy.
The following payoff matrix summarizes the game:
AF | |||
PCC | SQ | ||
PP | PCC | 1,1 | -1,3 |
SQ | 2,-1 | 0,2 |
where payoffs (X,Y) are for PrettyPics and AutoFote respectively.
Compared to the payoff associated with the predicted outcome of the simultaneous game, which of these firms strictly prefers to be the first-mover in a sequential version of this game? (In this context, "strictly prefers" means prefers and is not indifferent. For example, a firm strictly prefers an outcome in which it gets 3 to an outcome in which it gets 0, but does not strictly prefer it to a different outcome in which it also gets 3.)
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