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 table:

FIRM 1 / FIRM 2 l LOW l HIGH
LOW l -20, -30 l 900,600
HIGH l 100,800 l 50,50

a. Consider the simultaneous game where Firm 1 (the row player) and Firm 2 (the column player) decide on the quality at the same time. Using the Method 1 (the intersection of best responses), find out the Nash equilibria, if any.

b. Draw a game tree representing this simultaneous game given in section a.

c. Next consider a variation of this game. Suppose Firm 1 is the leader, he decides first on the quality. Then, the Firm 2 decides on the quality knowing the decision of Firm1. Draw the game three of this sequential game. Find the Subgame Perfect Nash Equilibrium of this game by backward induction method.

d. Draw a table representing this sequential game given in section c.

Reliability and validity reliability and validity are two important considerations that must be made with any type of data collection. reliability refers to the ability to consistently produce a given result. in the context of psychological research, this would mean that any instruments or tools used to collect data do so in consistent, reproducible ways. unfortunately, being consistent in measurement does not necessarily mean that you have measured something correctly. to illustrate this concept, consider a kitchen scale that would be used to measure the weight of cereal that you eat in the morning. if the scale is not properly calibrated, it may consistently under- or overestimate the amount of cereal that’s being measured. while the scale is highly reliable in producing consistent results (e.g., the same amount of cereal poured onto the scale produces the same reading each time), those results are incorrect. this is where validity comes into play. validity refers to the extent to which a given instrument or tool accurately measures what it’s supposed to measure. while any valid measure is by necessity reliable, the reverse is not necessarily true. researchers strive to use instruments that are both highly reliable and valid.