16. Suppose that Firefox and Microsoft each develop their own versions of an amazing new Web browser that allows advertisers to target consumers with great precision. Also, the new browser is easier and more fun to use than existing browsers . Each firm is trying to decide whether to sell the browser or to give it away. What are the likely benefits from each action? Which action is likely to occur? The more people use a . Microsoft? s strategies particular browser, Free h the more advertisers C mg: are willing to pay. And _ Free $300 $100 charging for a browser also generates profit. F?dbis $100 $700 If the browser is given ?rmqg$ \ awayandthecompetitor \\\\\ $9?) $?m Charge charges,likelytheone \\ ?$3oo $500 givenawaygainsmarket \\ share and that company makesalargeeconomicprofit.Theothercompanyincursaneconomic loss. If both browsers are given away, both companies probably make a comparable economic profit. And if both browsers are sold, both companies probably make the largest economic profit because they collect from both advertisers and consumers. A_payoff matrix is to the right that reflects this analysis. The numbersinthenmtrixaretheeconomicprofitinn?llionsofdollars. Microsoft?s profits are in the grey upper triangles and_Firefox?s profits are in the white lower triangles. The fact that for any given situation.Microsoft?s profits are larger than Firefox?s is realistic but does not affect the analysis. The joint profit is the largest when the browser is sold.and.is the smallest when the browser is given away. With the profits in the payoff matrix, the Nash equilibrium is to give the browsers away for free.
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Suppose that Mozilla and Microsoft each develop their own versions of an amazing new Web browser that allows advertisers to target consumers with great precision.? Also, the new browser is easier and more fun to use than existing browsers. Each firm is trying to decide whether to sell the browser or to give it away. ?? The payoff matrix shows each? firm's economic profit in millions of dollars.?
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