1. Suppose that Big W and Kmart are competing on whether to stick with barcodes or switch to radio frequency identification (RFID) tags to monitor the flow of products. Because many suppliers sell to both Big W and Kmart, it is much less costly for suppliers to use one system or the other, rather than to use both. The following payoff matrix shows the profits per year for each company resulting from the interaction of their strategies.

Kmart Bar codes RFID tags Big W earns Big W earns $4 billion $1 billion Bar codes Kmart earns Kmart earns $3 billion $2 billion Big W Big W earns Big W earns $3 billion $2 billion RFID tags Kmart earns Kmart earns $1 billion $4 billion