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Time Magazine and Newsweek are two competing news magazines. Suppose that each company charges the same $5.00 price for their magazines. Each wants to maximize its sales given this price.  Each week there are two potential cover stories. One is on politics and the other is on the economy. Sales of both companies are affected by their choice of cover story, as detailed in the following table.

Time Cover

Newsweek Cover

Time Sales (\'000s)

Newsweek Sales (\'000s)

Politics

Politics

300

150

Politics

Economy

700

200

Economy

Economy

200

150

Economy

Politics

400

700

 
Now suppose that Newsweek is able to choose its cover story first and announces its choice before Time chooses its cover.

i) Construct the extensive form of the game.

ii) What is the Nash equilibrium for this sequential game?

iii) Is there a first-mover advantage or a first-mover disadvantage in this game?

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9166321

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