Essay
You are considering entering a market serviced by a monopolist.You currently earn $0 economic profits,while the monopolist earns $5.If you enter the market and the monopolist engages in a price war,you will lose $5 and the monopolist will earn $1.If the monopolist doesn't engage in a price war,you will each earn profits of $2.
a.Write out the extensive form of the above game.
b.There are two Nash equilibria for the game.What are they?
c.Is there a subgame perfect equilibrium?
d.If you were the potential entrant,would you enter?
Explain why or why not.
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a.The extensive form is presented in the...View Answer
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