Question: Consider a sequential-move game in which an entrant is considering entering an industry in competition with an incumbent firm. If the entrant does not

Consider a sequential-move game in which an entrant is considering entering an industry in competition with an incumbent firm. If the entrant does not enter ("Out"), the incumbent firm earns a payoff of 10, while the entrant earns a payoff of 0. If the entrant enters ("In"), then the incumbent can either accommodate or fight. If the incumbent accommodates, both earn a payoff of 5. If the incumbent fights, then the entrant can either leave the industry ("Withdraw") or remain in it ("Stay"). If the entrant stays, both earn a payoff of -5. If the entrant withdraws, the entrant earns a payoff of - 1, and the incumbent earns a payoff of 8. The extensive form of the game is depicted in the following figure, where the payoffs are of the form (Entrant Payoff, Incumbent Payoff). In Incumbent Accommodate Fight Entrant Out Entrant (5,5) (0,10) Stay Withdraw (-5,-5) (-1,8) ?

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