Firm 1 is the potential entrant into a market in which firm 2 is the incumbent monopolist.Firm 1 moves first and chooses to "enter" or "not enter".If it does not "enter",then firm1 gets profit 0 and firm 2 gets the monopoly profit 10. If firm 1"enters",then firm 2 chooses to "fight" or "not fight".If firm 2 fights then firm 1's profit is -2 and firm 2's profit is 6.If firm 2 does "not fight", then firm 1's profit is 2 and firm 2's profit is 8. Firm 2's strategy of fight is best interpreted as
a) a committment
b) a non-credible threat
c) a punitive action
d) acquiescence
Please help!!!!
MA Economics
DSE
2014-16
Locked
