Question: You are considering entering a market serviced by a monopolist

You are considering entering a market serviced by a monopolist. You currently earn $0 economic profits, while the monopolist earns $5. If you enter the market and the monopolist engages in a price war, you will lose $5 and the monopolist will earn $1. If the monopolist doesn’t engage in a price war, you will each earn profits of $2.
There are two possible solutions or equilibria. What are they?


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  • CreatedSeptember 27, 2014
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