1. Suppose company A is a monopolist supplier of aircraft engines. Company B is

Question

1. Suppose company A is a monopolist supplier of aircraft engines. Company B is considering entering the market. Both the companies have to invest in capital investment that is difficult to divest if they are to serve the market. Therefore, both firms need to choose between several investment options. As expected. their payoffs depend on both their actions. Company A can choose to invest big or small. Company B after observing A?s action can either decide to stay out of the market or enter the market by making either a large investment or a minor investment. If A chooses to invest big, it will make a profit of 80 if B stays out, and will incur a loss of 30 if B enters the market. TA chooses to invest small, it will make a profit of 30 if B stays out, incurs a loss of 50 if B enters with large investment, or incurs a loss of 20 if B enters with minor investment. If A chooses to invest big, B will make a profit of 0 if it stays out, incurs a loss of 40 if it makes large investment, or makes a profit of 20 fit makes a minor investment. However, if A chooses to invest small. B will make a profit of 0, 60, 30 if it stays out, invests large or invests minor respectively. a. Draw the extensive form of this game. b. What are the information sets in this game? What are the subgames? c. Is this a game of perfect or imperfect information, and why? d. Identify and Nash equilibria of this game.

Explanation / Answer

9. The adjusted trial balance for The Washington Post Company for the year ended December 31, 2008, is as follows (in alphabetical order). Use the trial balance to prepare the closing entry for the year.

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