Question

Committing large investments to a single project is always risky, and it becomes even riskier when a competitor is set to do the same thing and the market is not ready to sustain two rival products.  In the game called "The Innovator's Dilemma" (or "The Developer's Dilemma"), there are two identical firms, A and B, and each can make one of two choices, to invest in the development of a new product or not to invest. If only one of the players chooses to invest, she will reap the profits from future market dominance, and the other one will get nothing. If both players choose to invest, they will have to compete fiercely and (both) will lose money. If neither invests, they both lose the profit opportunity and earn nothing.  Write down a payoff matrix for this game (feel free to assume whatever numbers describe the scenario described above).  Find the Nash equilibrium (or equilibriums) for this game.  If there is more than one equilibrium, what could a player do to get the best outcome for him/herself?  Can you give a real life example of this type of game?  Can this game explain why some innovations (such as alternative energy sources) are delayed?  Why or why not?

Answer 1

In the market ,two rival products doesn't easily compete.Both firms had full of planning and strategies but it is very riskier .Through the payoff matrix of game theory the basic principles are used to compete in market.