Two firms are in the chocolate market. Each can choose to go for the high end of the market (high quality) or the low end (low quality). Resulting profits are given by the following payoff matrix:
a. If each network is risk-averse and uses a maximin strategy, what will be the resulting equilibrium?
b. What will be the equilibrium if Network 1 makes its selection first? If Network 2 goes first?
c. Suppose the network managers meet to coordinate schedules and Network 1 promises to schedule its big show first. Is this promise credible? What would be the likely outcome?