Question: 3. Amazon must decide whether to enter the streaming market in a country where Netflix operates. If it chooses Not Enter, Amazon will have a

 3. Amazon must decide whether to enter the streaming market in

3. Amazon must decide whether to enter the streaming market in a country where Netflix operates. If it chooses Not Enter, Amazon will have a payoff of 1.5 (million) while Netflix will have a payoff of 3 (million). If Amazon chooses Enter, then the two firms play a simultaneous game where Amazon chooses between a Hostile strategy and a Balanced strategy, while Netflix chooses between Accommodating or Fighting the new entrant. The payoffs (in millions) from this interaction is given by the following matrix: Netflix A F Amazon H (0:0) Blan )] (i) Represent the entire game in extensive form (Draw a game tree). [6 Marks] (ii) Is this a game of perfect or imperfect information? |2 Marks] (iii) How many subgames are there in this game? [2 Marks] (iv) How many information sets does each player have? [2 Marks] (v) Represent the whole as a normal form game (i.e. matrix) and find all the pure-strategy Nash equilibria. [6 Marks] (vi) Find all the Subgame Perfect Nash Equilibria in this game. Are the number of NE and SPNE different here - why/why not? [7 Marks]

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