Describe the payoffs for an R&D game of chicken and contrast them with the payoffs in a prisoners' dilemma
What will be an ideal response?
In the R&D game of chicken, a firm can use the R&D if either it conducts the R&D or if its competitor conducts the R&D. So if one firm conducts the R&D, it bears the cost and reaps the reward but the other firm reaps only the reward because it pays none of the costs. In a game of chicken, neither firm "wants" to do the R&D—both firms would prefer that the other conduct the R&D. In the prisoners' dilemma R&D game, a firm can use the R&D only if it conducts R&D. If one firm conducts R&D, the firm incurs the costs of the R&D but then it alone reaps the rewards of the R&D. In this situation, both firms have the incentive to cheat on any agreement to restrict R&D because each firm knows that if it, and it alone cheats, its profit will increase.
You might also like to view...
Refer to Table 18.1. The opportunity cost of a hat in Russia is
A) 1/3 of a glove. B) 1/2 of a glove. C) 2 gloves. D) 3 gloves.
A recession causes a decrease in the demand for housing, resulting in substantial layoffs in the construction industry. The people laid off are considered
A) cyclically unemployment. B) frictionally unemployment. C) seasonally unemployment. D) structurally unemployment.
Figure 8-2
?
In Figure 8-2, which of the following moves can be explained by a tax cut?
A. A to B B. A to C C. A to D D. A to E
Other things equal, if planned investment spending is greater than actual investment spending, then aggregate expenditure will be ________ real GDP and inventories will ________
A) greater than; rise B) greater than; fall C) less than; rise D) less than; fall