Dominant Strategy/Nash Eq. (VHS vs. Betamax)

Please show all work and diagrams if necessary.

1) In the initial videocassette market (home use), there were two competing standards: Sony's Betamax and the VHS standard. Using hypothetical payoffs, we can analyze how both manufacturers can benefit from cooperation rather than competition. The following lists the payoffs for rival manufacturers and Sony in their decision to adopt one of the standards.

SEE WORD ATTACHMENT FOR PAYOFF MATRIX

a) Does Sony and/or the rival manufacturers have a dominant strategy? Explain.

b) Are there any Nash equilibria here? Explain and show how the equilibrium might be supported. Which outcome would Sony prefer, and why? Be sure to discuss cooperative vs. non-cooperative outcomes.

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Solution Summary

Explain and show how the equilibrium might be supported. Which outcome would Sony prefer, and why? Be sure to discuss cooperative vs. non-cooperative outcomes