Mini-case: Panasonic joins the Format War Please use the following mini-case to answer the fill-in-the-blank questions that follow. It's currently 2006, and the format war between Toshiba and Sony is in full swing. Both companies are actively building alliances with their suppliers and competitors in order to get the industry to adopt their particular technological format. There are 3 major competitors that have not yet joined an alliance: Panasonic, LG, and Samsung. In order to incentivize these remaining competitors to join their respective alliances, both Toshiba and Sony are offering profit-sharing incentives to companies that join, with larger incentives for the companies who join earlier and smaller incentives for the companies who join later. If all 3 companies join the same alliance, then the format war will effectively be over and the profits to be shared will be $175 million. If they are split between the two companies, however, the profits to be shared will only be $100 million, due to increased price competition. The companies offer similar incentives, but Toshiba offers a slightly larger incentive for the companies that are earlier to join: Each firm can only join one alliance, and all 3 firms will certainly join one of these alliances eventually. Panasonic is currently trying to decide which alliance to join. They want to move before LG and Samsung to get the bigger payout, so they are going to make a commitment by the end of the business day. Samsung has expressed reluctance to make a commitment, so they will be the last to join any alliance. Use the following game tree to answer the following questions. Please note that the payoffs have already been filled in for you, so be sure that the companies and choices you put in each spot match the associated payoffs! Use the following game tree to answer the following questions. Please note that the payoffs have already been filled in for you, so be sure that the companies and choices you put in each spot match the associated payoffs! Solve for the equilibrium of this game, i.e., the mutual best response. How much money will Panasonic make? Give your answer in millions, e.g., an answer of 10 million should be entered as "10." Mini-case: Panasonic joins the Format War Please use the following mini-case to answer the fill-in-the-blank questions that follow. It's currently 2006, and the format war between Toshiba and Sony is in full swing. Both companies are actively building alliances with their suppliers and competitors in order to get the industry to adopt their particular technological format. There are 3 major competitors that have not yet joined an alliance: Panasonic, LG, and Samsung. In order to incentivize these remaining competitors to join their respective alliances, both Toshiba and Sony are offering profit-sharing incentives to companies that join, with larger incentives for the companies who join earlier and smaller incentives for the companies who join later. If all 3 companies join the same alliance, then the format war will effectively be over and the profits to be shared will be $175 million. If they are split between the two companies, however, the profits to be shared will only be $100 million, due to increased price competition. The companies offer similar incentives, but Toshiba offers a slightly larger incentive for the companies that are earlier to join: Each firm can only join one alliance, and all 3 firms will certainly join one of these alliances eventually. Panasonic is currently trying to decide which alliance to join. They want to move before LG and Samsung to get the bigger payout, so they are going to make a commitment by the end of the business day. Samsung has expressed reluctance to make a commitment, so they will be the last to join any alliance. Use the following game tree to answer the following questions. Please note that the payoffs have already been filled in for you, so be sure that the companies and choices you put in each spot match the associated payoffs! Use the following game tree to answer the following questions. Please note that the payoffs have already been filled in for you, so be sure that the companies and choices you put in each spot match the associated payoffs! Solve for the equilibrium of this game, i.e., the mutual best response. How much money will Panasonic make? Give your answer in millions, e.g., an answer of 10 million should be entered as "10
