A Japanese electronics company and an Americanelectronics company are both considering working ondeveloping a superconductor. If both companies work onthe superconductor, they will have to share the market, andeach company will lose $10 billion. If only one companyworks on the superconductor, that company will earn $100billion in profits. Of course, if neither company works onthe superconductor, then each company earns profits of $0. a Formulate this situation as a two-person nonconstant-sum game. Does the game have any equilibrium points? b Now suppose the Japanese government offers theJapanese electronics company a $15 billion subsidy to work on the superconductor. Formulate the reward ma-trix for this game. Does this game have any equilibrium points?c Businesspeople have often said that a protectionist attitude toward trade can increase exports, but econo-mists have usually argued that it will reduce exports. Whose viewpoint does this problem support?
A Japanese electronics company and an American
electronics company are both considering working on
developing a superconductor. If both companies work on
the superconductor, they will have to share the market, and
each company will lose $10 billion. If only one company
works on the superconductor, that company will earn $100
billion in profits. Of course, if neither company works on
the superconductor, then each company earns profits of $0.
a Formulate this situation as a two-person nonconstant-
sum game. Does the game have any equilibrium points?
b Now suppose the Japanese government offers the
Japanese electronics company a $15 billion subsidy to
work on the superconductor. Formulate the reward ma-
trix for this game. Does this game have any equilibrium
points?
c Businesspeople have often said that a protectionist
attitude toward trade can increase exports, but econo-
mists have usually argued that it will reduce exports.
Whose viewpoint does this problem support?
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