The text mentioned a model of predatory pricing in which an incumbent tries to ''beat up'' a rival, exhausting the resources the rival needs to continue operating in the market, causing it to exit. Consider a specific example of this sort of model given by the extensive form in Figure. As the figure shows, there are three possible outcomes. If the entrant E does not enter, leaving the incumbent I to operate alone, the incumbent earns 3,600. If the entrant spends fixed entry cost K

The period of predation costs thee ntrant FE and the incumbent FI (where F stands for ''fighting''). Compute the sub game-perfect equilibrium for FI > 2,000 and for FI

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Enter Don't enter Prey 0, 3,600 Don't prey IE 1,600-K, 1,600 Exit -K-FE. 3,600-F