Unformatted text preview: if firm A chooses H, the worst payoff would occur if firm B also chooses H, and A's payoff is 30. If A chooses L, the worst payoff would occur if B also chooses L, and the payoff is 20. With a maximin strategy, firm A chooses H because its worst payoff is greater than the payoff if it chooses L, and the payoff is 30. If B chooses L, the worst payoff would occur if A also chooses L, and the payoff is 20. With a maximin strategy, B chooses H because its worst payoff is greater than the payoff if it chooses L. So, under the maximin, both A and B produce a highquality system. 3b. If A chooses first, it will choose its maximin strategy of H. Now B will rationally choose L, since it prefers 35 to 30. The outcome is (H, L), with A getting a payoff of 50. If B chooses first, it will choose the maximin strategy of H. Now A will choose Low because it prefers 40 to 30. The outcome is (L,H), which gives B a payoff of 60....
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 Spring '08
 Rubenfield
 Game Theory, worst payoff, maximin strategy

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