Give authentic answer to every part step by step and take a like two firms (form A and firm C) compete for customers and are considering improving their operations. Each firm has oneof two options: (i) to invest in a new Al - powered recommendation system or (ii) to invest in upgrading their DataManagement Systems. Investing in the recommendation system carries a cost of 20 for each firm and generates abenefit of vor equal to 0 bgut as this system is patentable only one firm could reap this reward: if both firms invest inthe recommendation system then each gets on expectation v/2 while if only one invests it receives v. Upgrading dataManagement Systems generates an individual benefit of 20 but also an individual cost that is increasing in the numberof firms upgrading: if only one firm upgrades it bears a cost of 10 while if both firms upgrade tehy each incur a cost of19. Both firms simultaneously decide whether to invest in the recommendation system or upgrade Data Managementwrite is firm R's best response as a function of the parameter v to firm C upgrading its data management system? Whatis F down he 2x2 payoff matrix of this game. What is firm R's best response as a function of the parameter v to firm Cinvesting in the recommendation system?

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Answered: two firms (form A and firm C) compete…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter16: Government Regulation

Section: Chapter Questions

Problem 2.2CE

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Give authentic answer to every part step by step and take a like

two firms (form A and firm C) compete for customers and are considering improving their operations. Each firm has one
of two options: (i) to invest in a new Al - powered recommendation system or (ii) to invest in upgrading their Data
Management Systems. Investing in the recommendation system carries a cost of 20 for each firm and generates a
benefit of vor equal to 0 bgut as this system is patentable only one firm could reap this reward: if both firms invest in
the recommendation system then each gets on expectation v/2 while if only one invests it receives v. Upgrading data
Management Systems generates an individual benefit of 20 but also an individual cost that is increasing in the number
of firms upgrading: if only one firm upgrades it bears a cost of 10 while if both firms upgrade tehy each incur a cost of
19. Both firms simultaneously decide whether to invest in the recommendation system or upgrade Data Management
write is firm R's best response as a function of the parameter v to firm C upgrading its data management system? What
is F down he 2x2 payoff matrix of this game. What is firm R's best response as a function of the parameter v to firm C
investing in the recommendation system?

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