Question: two firms compete in selling fileencryption software because both firms...
Question details
Two
firms compete in selling file-encryption software. Because both
firms use the same encryption standard, files encrypted by one
firm’s software can be read by the others, which is an advantage
for consumers. Firm 1 has a much larger market share because it
entered the market earlier and its software has a better user
interface. Both firms are now considering an investment in a new
encryption standard. The two firms can either invest or not invest
in this new standard. Resulting profit is given by the payoff
matrix.
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