Two software firms have developed an identical new software application. They are debating whether to give the new app away free and then sell add-ons or sell the application at $30 a copy
The payoff matrix is above and the payoffs are profits in millions of dollars. What is the Nash equilibrium of the game? A) Both Firm 1 and 2 will sell the software application at $30 a copy.
B) Both Firm 1 and 2 will give the software application away free.
C) Firm 1 will give the application away free and Firm 2 will sell it at $30.
D) There is no Nash equilibrium to this game.
B
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The classical economists believed
A. wages and prices were inflexible downward. B. if nothing was done, recessions would become depressions. C. recessions needed quick countercyclical action by the government. D. the economy was essentially self-regulating.
Behavioral economics:
A. draws on insights from psychology to expand models of individual decision making. B. draws on insights from business theory to expand models of household behavior. C. draws on insights from anthropology to clarify models of individual decision making. D. is the least disputed field of economics.