Mathematics, 11.08.2021 07:10 Lilbre4676

ABC is considering entering a market dominated by DEF. These companies’ profit depends on whether ABC enters and whether DEF sets a low price or a high price: high price low price
Enter

Do not enter

Fully explain your answers:
a. Does either company have a dominant strategy?
b. Does your answer to part (a) help you figure out what the other player should do? What is the Nash equilibrium? Is there only one?
c. BB threatens ABC by saying, “If you enter, we will set a low price, so you had better stay out.” Do you think ABC should believe the threat? Why or why not?
d. If both ABC and DEF could collude and agree on how to split the total profits, what outcome would they pick?

Answers: 2

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ABC is considering entering a market dominated by DEF. These companies’ profit depends on whether AB...