Market for basketballs is dominated by two firms wilson and

Reference no: EM13391236

The market for basketballs is dominated by two firms: Wilson and Spalding. The research department of Wilson has discovered a new technology on how to make more durable basketballs and is considering whether or not to adopt the new technology. Adoption would entail a fixed setup cost of C but would increase revenues. However, if Wilson adopts the new technology, Spalding can easily copy it at a lower setup cost of C/2. If Wilson does not adopt the new technology, it will earn $10 and Spalding will earn $4. If Wilson adopts and Spalding does likewise, each firm will earn $30 in revenues. If Wilson adopts and Spalding does not, Wilson would earn $40 in revenues while Spalding would earn $0.

(a) Write this game in extensive form.

(b) Under what conditions (i.e., for what values of C) does Spalding have an incentive to adopt the new technology if Wilson introduces it?

Reference no: EM13391236

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