"Sequential Games - A sequential game. The game is...

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A sequential game……. . The game is shown in extended form below. Player 1 makes the first move. Player 2 then makes her move. Then player 1 makes final move. The payoffs shown are (Player 1’s payoff, Player 2’s payoff) Player 1 will open with option (circle one) A B C Player 2 then play option (circle one) X Y Player 1 will finish with option (circle one) D E F Player 1’s payoff will be _________. Player 2’s payoff will be __________ (110, 180) (150, 200) (140, 250) (130, 300) (190, 190) (210, 180) (200, 200) (50, 250) (70, 230) (80, 200) (100, 280) (130, 250) (120, 300) (150, 140) (140, 220) (160, 200) (60, 210) (80, 250) Y A D D 1 1 1 1 1 1 2 2 1 D D D D E E E E E E F F F F F F 2 X X X C Y B
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Suppose the market for computer chips is dominated by two firms: Intel and AMD. Intel has discovered how to make superior chips and is considering whether or not to adopt the new technology. Adoption would entail a fixed setup cost of C. However, if Intel adopts the new technology, AMD can easily copy it at a lower setup cost of C/2. If Intel adopts and AMD does not, Intel would earn $20 in revenues while AMD would earn $2. If Intel adopts and AMD does likewise, each firm will earn $15 in
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This note was uploaded on 04/12/2011 for the course ECON 415 taught by Professor Holland during the Spring '09 term at Purdue University-West Lafayette.

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"Sequential Games - A sequential game. The game is...

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