Consider two hypothetical firms: Netflex, considering an investment on developing an electric vehicle; and Plugcar, looking into the profitability of building charging stations for electric vehicles. Each firm has two possible strategies: ‘Innovate’ and ‘Do not innovate’. If both firms decide to innovate, the payoffs are high because electric vehicles and charging stations complement each other. If one firm innovates and the other does not, the former experiences a loss because the innovation cannot be profitable without the other. The matrix below describes the hypothetical payoffs.
Max 200 words