Consumers drive bulk of BlackBerry growth Apple rignt square

Consumers drive bulk of BlackBerry growth Apple rignt squares Research in Motion (RIM) added 3 8 milion new BlackBerry subscribees in the last quarter and increased its profit by 33 percent Consumers made up 80 percent of the new subscrbers as RIM introduced new features and lowered prices But compettion increased as Apple introduced its new Phone and lowened the price of ts cider model RIM said t \"ant worried about the competition No R&D; $100m $100mm Source Wall Street Joumal, June 19, 2009 The payoff matrix shows the game that Apple and RIM play The numbers in the table are milions of dollars 80m RIM What is the eqalibrium of the game? O A. The equilibium of the game is that neither RIM nor Apple undertake O B. The equibrium of the game is that Apple undertakes research and 5200m research and development development and RM does not OC The equlibrium of the game is that Apple and RIM both undertake h and development OD. The equkun ofthe game is that RIMundertakes research and develepment and Apple does net This gano has no equbu OE\" Cick to seiect your answer 711 8J19

Solution

For above game between Apple and RIM

Both the players have strategy of Invest and Don\'t Invest in RnD

To find the Nash Equilibrium we need to find the best response of each firm to other firm\'s response and then to find a combination of strategy which has no profitable deviation.

Best Response of RIM for Apple\'s to Invest strategy= Invest

Because RIM has highest payoff if it Invest $80mn>-$70mn

Best Response of RIM for Apple\'s to not invest in RnD strategy= Invest for same reasoning of having highest payoff if it invests $190mn>$160mn

For RIM to Invest is strictly dominating strategy to not invest in RnD

Similarly we can find out for Apple and we found out even to Apple Invest is dominating strategy to not invest

Only Nash Equilibrium possible here is (Invest,Invest)

Option C is correct answer