Game Theory Question Consider the following normal form entry deterrence game between an incumbent monopolist and a potential entrant. Potential entrant Stay out 400,0 Enter PH 200,40 Incumbent PL 100,-10 150,0 a) Can you find any pure strategy Nash equilibrium/a in this game? b) Assume playing mixed strategies, find their best response functions and draw them in a diagram. c) Assume the incumbent firm can observe the opponent's choice before he decides and that the potential entrant knows this, will the potential entrant enter? d) Write down the sequential (extensive form) game and find the subgame perfect equilibrium. Explain the outcome. e) How many strategies does each player have?

Game Theory Question Consider the following normal form entry deterrence game between an incumbent monopolist and a potential entrant. Potential entrant Stay out 400,0 Enter PH 200,40 Incumbent PL 100,-10 150,0 a) Can you find any pure strategy Nash equilibrium/a in this game? b) Assume playing mixed strategies, find their best response functions and draw them in a diagram. c) Assume the incumbent firm can observe the opponent's choice before he decides and that the potential entrant knows this, will the potential entrant enter? d) Write down the sequential (extensive form) game and find the subgame perfect equilibrium. Explain the outcome. e) How many strategies does each player have?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.3P

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