Consider the following predation game involving an incumbent and a potential ent

Question

Consider the following predation game involving an incumbent and a potential entrant. Payoffs are written with the potential entrant’s profits listed first and the incumbent’s listed second. The profit numbers represent discounted values over the life of the firms.

i) What is the equilibrium of this game?

ii) Would the equilibrium be different if the (-5, 0) payoff were instead (-5, 8)?

B. Consider the following predation game involving an incumbent and a potential entrant. Payoffs are written with the potential entrant's profits listed first and the incumbent's listed second. The Pn (0, 10) Stays Out Predates (4,6) D What is the equilibrium of this game? ii) Would the equilibrium be different if the (-5, 0) payoff were instead (-5, 8)?

Explanation / Answer

Consider the following predation game involving an incumbent and a potential ent

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