c. If the two firms could cooperate, what outcome would
you predict in this game? Explain.
14. The table shows the payoff matrix for a game between Toyota
and Honda, each of which is contemplating building a factory in a
new market. Each firm can either build a small factory (and
produce a small number of cars) or build a large factory (and
produce a large number of cars). Suppose no other car
manufacturers are selling in this market.
Toyota’s DecisionSmall Factory Large FactoryHonda’s
DecisionHigh Industry
PriceMedium
Industry PriceSmall
FactoryHonda profits:
$20 millionHonda profits:
$12 millionToyota profits:
$20 millionToyota profits:
$25 millionMedium
Industry PriceLow Industry
Price