Answer:
Explanation:
From the given information, we can have the following breakdown.
Date Account Name Dr Cr
Mar 1 2020 Cash 31900
Bond Payable 30000
Interest Payable
(30000 × 8% × 1/6 months) 400
Premium on Bond Payable
(30000 × [105 -100]%) 1500
June 30, 2020 Interest Expense 670
Interest Payable 400
Premium on Bond payable
(1500 × 4/46 months) 130
Cash 1200
Sept 1, 2020 Interest Expense 111
Premium on bond payable 22
Cash 133
Sept 1, 2020 Bond payable 10000
Premium on Bond Payable 435
Cash 8900
Gain on Redemption of bonds 1535
Two firms decide whether to launch a new product: (i) If both firms choose to launch a new product, then each firm will receive $40 million due to incurring new expenses; (ii) if just one firm chooses to launch a new product, the firm launching a new product grabs market share from the other firm, and will receive $30 million, while the other firm which chooses not to launch will receive $45 million; (iii) if neither firm choose to launch a new product, then each firm will receive $50 million from current market. Assume both firms wants to maximize its revenue, so what will be their best move
Answer:
don't launch
Explanation:
Game theory looks at the interactions between participants in a competitive game and calculates the best choice for the player.
Dominant strategy is the best option for a player regardless of what the other player is playing.
Nash equilibrium is the best outcome for players where no player has an incentive to change their decisions.
The payoff matrix for this question is
Launch (in millions) Don't Launch (in millions)
Launch (in millions) $40, $40 $30, $45
Don't Launch (in millions) $45, $30 $50, $50
It can be seen that the best strategy for each firm is not to launch because the payoffs of not launching ($45, $50) is greater than the payoff of launching ($40, $30)