E 11 Continue to maximize profit (0,80) Stay out Fight entry Enter 12 (0, 10) Continue to maximize profit (30, 50) ($millions entrant's profit, Smillions incumbent's profit) In the sequential game shown above, "E" represents the potential entrant firm, and "I" represents the incumbent firm. Firm need to decide whether to enter the market or "stay out". If E stays out, the incumbent is at decision node 11 and simply continues business as usual. If firm E enters, firm I is in decision node 12 and needs to decide whether to "fight entry" or "continue". Payoffs are given in parentheses, with the first term for form E and the second term for firm I. What is the backward induction equilibrium of this game? None of the above are correct. E: Enters; I: (Fights at 11, Fights at 12) E: Stays Out; I: (Continues at 11, Fights at 12) E: Enters; I: (Continues at 11, Continues at 12) E: Stays Out; I: (Continues at 11, Continues at 12)

E 11 Continue to maximize profit (0,80) Stay out Fight entry Enter 12 (0, 10) Continue to maximize profit (30, 50) ($millions entrant's profit, Smillions incumbent's profit) In the sequential game shown above, "E" represents the potential entrant firm, and "I" represents the incumbent firm. Firm need to decide whether to enter the market or "stay out". If E stays out, the incumbent is at decision node 11 and simply continues business as usual. If firm E enters, firm I is in decision node 12 and needs to decide whether to "fight entry" or "continue". Payoffs are given in parentheses, with the first term for form E and the second term for firm I. What is the backward induction equilibrium of this game? None of the above are correct. E: Enters; I: (Fights at 11, Fights at 12) E: Stays Out; I: (Continues at 11, Fights at 12) E: Enters; I: (Continues at 11, Continues at 12) E: Stays Out; I: (Continues at 11, Continues at 12)

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter18: Auctions

Section: Chapter Questions

Problem 18.1IP

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