P-TV and QRS-TV Are Trying to Decide Whether to Air

Multiple Choice

P-TV and QRS-TV are trying to decide whether to air a sit-com or a reality show in a given time slot. Viewers like both sit-coms and reality shows, but sitcoms are more expensive to produce than reality shows since real actors need to be hired. QRS-TV makes its decision first, and then P-TV observes that choice before making its decision. Both stations know all of the information in the decision tree below. Suppose QRS-TV enters into an agreement with P-TV that gives QRS-TV the exclusive right to air a reality show during this time slot. QRS-TV would be willing to pay P-TV _______ in order to persuade P-TV to enter into this agreement.

A) no more than $10 million
B) nothing
C) more than $10 million
D) no more than $5 million