Firm 1 -Two Software Firms Have Developed an Identical New Software Application

Multiple Choice

Firm 1

-Two software firms have developed an identical new software application. They are debating whether to give the new application away for free and then sell add- ons or sell the application at
$30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is the Nash equilibrium of the game?

A) Firm 1 will give the application away for free and Firm 2 will sell it at $30.
B) There is no Nash equilibrium to this game.
C) Both Firm 1 and 2 will sell the software application at $30 a copy.
D) Both Firm 1 and 2 will give the software application away for free.