ECO550 Incumbent Firm Move Game Strategy and Equilibrium Discussion Paper 6
In the text, we consider a sequential-move game in which an entrant was considering entering an industry in competition with an incumbent firm (See Figure 15-1). Consider now that the entrant, if fought, has the possibility of withdrawing from the industry (at a loss of 1 for the entrant and a gain of 8 for the incumbent), or staying at a loss of 5 for each player). What is the equilibrium of this game? Discuss if the entrant is better off with or without the ability to withdraw.
I have added a diagram of the game to help you see the options.
Be sure to cite all source used.
PLEASE DO NOT RELY ON WIKIPEDIA, INVESTOPEDIA OR ANY OTHER PEDIA AS A REFERENCE AT ANYTIME IN THIS COURSE.
Rules for credit in the discussion:
Your Pin, the presentation of your solution to the above, 120 words required for full credit of 10 points. Click the large Yellow Button Pin +
Comment/Reply to 2 other participants, 30 words each required for full credit of 5 points each.
Message from the teacher:
While you are thinking about this game, check out the link Asking For A Raise Is Just One Of Many Games We Play. Have you ever considered that you may have better information that you boss about what you have accomplished? Are you afraid to enter the game? Have you ever considered that the offer of a raise is just the first round in negotiation? Check out strategic bargaining.