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European-based T-Mobile are contemplating infrastructure investments in a
developing mobile telephone market. Qualcomm presently uses a
code-division multiple access (CDMA) technology, which almost 67 million
users in the United States utilize. In contrast, T-Mobile uses a global
systems for mobile communication (GSM) technology that has become the
standard in Europe and Asia. Each company must (simultaneously and
independently) decide which of these two technologies to introduce in
the new market. Qualcomm estimates that it will cost $900 million to
install its CDMA technology and $1.8 billion to install GSM technology.
T-Mobileâs projected cost of installing GSM technology is $950 million,
while the cost of installing the CDMA technology is $2.5 billion. As
shown in the accompanying table, each companyâs projected revenues
depend not only on the technology it adopts, but also on that adopted by
Construct the normal form of this game. Then,
explain the economic forces that give rise to the structure of the
payoffs and any difficulties the companies might have in achieving Nash
equilibrium in the newmarket.
Originally posted 2014-05-11 04:53:00. Republished by Blog Post Promoter
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