Nash Equilibrium - Game Theory

Holmes Geothermal

You are the head of Holmes Geothermal and considering how much to invest in a recent joint research project with WatsonTherm, codenamed "Silver Blaze." Your goal is to maximize the value of the research project less the amount of resources you invest in the project.

The Value of Silver Blaze

The value to Holmes Geothermal of the Silver Blaze project is 6log (2Xh + Xw), where Xh is the amount invested by Holmes Geothermal and Xw is the amount invested by WatsonTherm; note that your investment is more valuable to your than WatsonTherm's investment, since it ensures that the project will focus on technical challenges facing Holmes Geothermal. The value of Silver Blaze to WatsonTherm is 6log (2Xnv + 2Xdb). Choosing Investment must now decide how much to invest in Silver Blaze.

How much will you choose to invest? _____________. How much do you expect WatsonTherm to choose to invest? ____________