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7.7. HDTV STANDARDS. Consider the following game depicting the process of standard setting in high-definition television (HDTV). The US and Japan must simultaneously decide whether to invest a high or a low value into HDTV research. If both countries choose a low effort than payoffs are (4,3) for US and Japan, respectively; if the US chooses a low level and Japan a high level, then payoffs are (2,4); if, by contrast, the US chooses a high level and Japan a low one, then payoffs are (3,2). Finally, if both countries choose a high level, then payoff are (1,1). (a) Are there any dominant strategies in this game? What is the Nash equilib- rium of the game? What are the rationality assumptions implicit in this equi- librium? (b) Suppose now the US has the option of committing to a strategy ahead of Japan's decision. How would you model this new situation? What are the Nash equilibria of this new game? (c) Comparing the answers to (a) and (b), what can you say about the value of commitment for the US? (d) "When pre-commitment has a strategic value, the player that makes that com- mitment ends up 'regretting' its actions, in the sense that, given the rivals' choices, it could achieve a higher payoff by choosing a different action." In light of your answer to (b), how would you comment this statement?

7.7. HDTV STANDARDS. Consider the following game depicting the process of standard setting in high-definition television (HDTV). The US and Japan must simultaneously decide whether to invest a high or a low value into HDTV research. If both countries choose a low effort than payoffs are (4,3) for US and Japan, respectively; if the US chooses a low level and Japan a high level, then payoffs are (2,4); if, by contrast, the US chooses a high level and Japan a low one, then payoffs are (3,2). Finally, if both countries choose a high level, then payoff are (1,1). (a) Are there any dominant strategies in this game? What is the Nash equilib- rium of the game? What are the rationality assumptions implicit in this equi- librium? (b) Suppose now the US has the option of committing to a strategy ahead of Japan's decision. How would you model this new situation? What are the Nash equilibria of this new game? (c) Comparing the answers to (a) and (b), what can you say about the value of commitment for the US? (d) "When pre-commitment has a strategic value, the player that makes that com- mitment ends up 'regretting' its actions, in the sense that, given the rivals' choices, it could achieve a higher payoff by choosing a different action." In light of your answer to (b), how would you comment this statement?

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter13: Positive Externalities And Public Goods
Section: Chapter Questions
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7.7
ish navigator and explorer Hernan Cortéz reports that, "under the pretext that lour] ships were not navigable, I had them sunk; thus all hope of leaving was lost and I could act more securely." Discuss the strategic value of this action knowing the Spanish colonists were faced with potential resistance from the Mexican natives. 7.7. HDTV STANDARDS. Consider the following game depicting the process of standard setting in high-definition television (HDTV).4 The US and Japan must simultaneously decide whether to invest a high or a low value into HDTV research. If both countries choose a low effort than payoffs are (4,3) for US and Japan, respectively; if the US chooses a low level and Japan a high level, then payoffs are (2,4); if, by contrast, the US chooses a high level and Japan a low one, then payoffs are (3,2). Finally, if both countries choose a high level, then payoff are (1,1). (a) Are there any dominant strategies in this game? What is the Nash equilib- rium of the game? What are the rationality assumptions implicit in this equi- librium? (b) Suppose now the US has the option of committing to a strategy ahead of Japan's decision. How would you model this new situation? What are the Nash equilibria of this new game? (c) Comparing the answers to (a) and (b), what can you say about the value of commitment for the US? (d) "When pre-commitment has a strategic value, the player that makes that com- mitment ends up 'regretting' its actions, in the sense that, given the rivals' choices, it could achieve a higher payoff by choosing a different action." In light of your answer to (b), how would you comment this statement? 7.8. FINITELY REPEATED GAME. Consider a one-shot game with two equilibria and sup- pose this game is repeated twice. Explain in words why there may be equilibria in the
Transcribed Image Text:ish navigator and explorer Hernan Cortéz reports that, "under the pretext that lour] ships were not navigable, I had them sunk; thus all hope of leaving was lost and I could act more securely." Discuss the strategic value of this action knowing the Spanish colonists were faced with potential resistance from the Mexican natives. 7.7. HDTV STANDARDS. Consider the following game depicting the process of standard setting in high-definition television (HDTV).4 The US and Japan must simultaneously decide whether to invest a high or a low value into HDTV research. If both countries choose a low effort than payoffs are (4,3) for US and Japan, respectively; if the US chooses a low level and Japan a high level, then payoffs are (2,4); if, by contrast, the US chooses a high level and Japan a low one, then payoffs are (3,2). Finally, if both countries choose a high level, then payoff are (1,1). (a) Are there any dominant strategies in this game? What is the Nash equilib- rium of the game? What are the rationality assumptions implicit in this equi- librium? (b) Suppose now the US has the option of committing to a strategy ahead of Japan's decision. How would you model this new situation? What are the Nash equilibria of this new game? (c) Comparing the answers to (a) and (b), what can you say about the value of commitment for the US? (d) "When pre-commitment has a strategic value, the player that makes that com- mitment ends up 'regretting' its actions, in the sense that, given the rivals' choices, it could achieve a higher payoff by choosing a different action." In light of your answer to (b), how would you comment this statement? 7.8. FINITELY REPEATED GAME. Consider a one-shot game with two equilibria and sup- pose this game is repeated twice. Explain in words why there may be equilibria in the
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