Question $12(2$ points$)$

In order for Burger Doodle to successfully implement a limit pricing strategy for entry deterrence, it must be able to

Question $12$ options:

convince Designer Burger that it will set the Nash price of $$10$ should Designer Burger decide to stay out of the market.

convince Designer Burger that it will set the Nash price of $$10$ should Designer Burger decide to enter the market.

make a credible commitment to maintain its initial price should Designer Burger decide to enter the market.

make a credible promise to price its burgers at $$12.$

make a credible threat to lower its price to $$8$ should Designer Burger decide to enter the market.

Question $13(2$ points$)$

If the condition in the prior question is met, Burger Doodle will set its price equal to $$\_\_\_\_\_$ and it will earn $$\_\_\_\_\_$ of profit, while Designer Burger will earn $$\_\_\_\_\_$ of profit.

Question $13$ options:

$8$; $125,000$; $0$

$8$; $75,000$; $-40,000$

$10$; $101,000$; $25,000$

$10$; $96,000$; $25,000$

$12$; $165,000$; $0$

Question $14(2$ points$)$

If the condition in Q$12$ is NOT met, Burger Doodle will set price equal to $$\_\_\_\_\_$ at decision node $3$ and it will earn $$\_\_\_\_\_$ of profit, while Designer Burger will earn $$\_\_\_\_\_$ of profit.

Question $14$ options:

$8$; $125,000$; $0$

$8$; $75,000$; $-40,000$

$10$; $101,000$; $25,000$

$10$; $96,000$; $25,000$

$12$; $165,000$; $0$

Question $15(2$ points$)$

If the condition in Q$12$ is NOT met, Burger Doodle will set price equal to $$\_\_\_\_\_$ at decision node $1$ and the outcome $\_\_\_\_\_($is$,$ is not$)$ a Nash equilibrium.

Question $15$ options:

$8$; is

$8$; is not

$12$; is

$12$; is notUse the following information to answer the next $4$ questions:

Burger Doodle, the incumbent firm, wishes to set a limit price of $$8($rather than the

profit$-$maximizing profit of $$12)$ to prevent Designer Burger from entering its

profitable market. The game tree below shows the payoffs for various decisions.

Burger Doodle makes its pricing decision, then Designer Burger decides whether to

enter or stay out of the market. If Designer Burger chooses to enter the market, then

Burger Doodle may or may not decide to accommodate Designer's entry by changing

its initial price to the Nash equilibrium price of $$10.$