Question: please answer question 1,2 Two firms, E (for entrant) and I (for incumbent) play the following game. First, E chooses In or Out. If E

please answer question 1,2
Two firms, E (for entrant) and I (for incumbent) play the following game. First, E chooses "In" or "Out". If E chooses "Out" then payoffs are (0,2) (the convention here is that E 's payoff is given first). If E chooses "In", then E and I play a simultaneous move game where each chooses to either "fight" (F) or "accommodate" (A).(F,F) yields payoffs of (3,1),(F,A) yields payoffs of (1,2), and (A,F) yields payoffs of (2,1). In the event that the firms choose (A,A) at this stage, the game continues. Each firm simultaneously chooses either "here" (H) or "there" (T). Payoffs after these choices are given as follows: 1 Make this assumption for this question only, and not for subsequent questions. Similar disclaimers apply throughout. 1. (5 points) Draw the extensive form of this game. 2. (15 points) Solve for the subgame perfect equilibria of this game as a function of x. Be sure to consider mixed strategies. Two firms, E (for entrant) and I (for incumbent) play the following game. First, E chooses "In" or "Out". If E chooses "Out" then payoffs are (0,2) (the convention here is that E 's payoff is given first). If E chooses "In", then E and I play a simultaneous move game where each chooses to either "fight" (F) or "accommodate" (A).(F,F) yields payoffs of (3,1),(F,A) yields payoffs of (1,2), and (A,F) yields payoffs of (2,1). In the event that the firms choose (A,A) at this stage, the game continues. Each firm simultaneously chooses either "here" (H) or "there" (T). Payoffs after these choices are given as follows: 1 Make this assumption for this question only, and not for subsequent questions. Similar disclaimers apply throughout. 1. (5 points) Draw the extensive form of this game. 2. (15 points) Solve for the subgame perfect equilibria of this game as a function of x. Be sure to consider mixed strategies
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
