Firm 1 has two options: enter a new market (E) or stay out (O). If Firm...

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Firm 1 has two options: enter a new market (E) or stay out (O). If Firm 1 decides to enter the market, Firm 2, the incumbent, can either fight (F) or accommodate (A). If Firm 2 chooses to fight, Firm 1 can choose to compete with Firm 2 by raising their advertising budget (C) or keep their planned budget the same (NC). The payoffs to Firm 1 and 2 if Firm 1 chooses O are 3 and 4. If Firm 2 chooses A, the payoffs are 3 and 0. The payoffs from E followed by F and NC are 1 and 2. The payoffs from E followed by F and C are x and 1. The parameter x is an integer and x > 1. What is the lowest integer value of x so that Firm 1 will definitely choose E in a subgame perfect equilibrium of this game? Write your answer as an integer (no decimal points). Firm 1 has two options: enter a new market (E) or stay out (O). If Firm 1 decides to enter the market, Firm 2, the incumbent, can either fight (F) or accommodate (A). If Firm 2 chooses to fight, Firm 1 can choose to compete with Firm 2 by raising their advertising budget (C) or keep their planned budget the same (NC). The payoffs to Firm 1 and 2 if Firm 1 chooses O are 3 and 4. If Firm 2 chooses A, the payoffs are 3 and 0. The payoffs from E followed by F and NC are 1 and 2. The payoffs from E followed by F and C are x and 1. The parameter x is an integer and x > 1. What is the lowest integer value of x so that Firm 1 will definitely choose E in a subgame perfect equilibrium of this game? Write your answer as an integer (no decimal points).

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To find the lowest integer value of x so that Firm 1 will definitely choose to enter the market E in ... View the full answer