2

docx

School

Strayer University, Washington *

*We aren’t endorsed by this school

Course

ECO 550

Subject

Economics

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by DeaconPuppyPerson462

When considering the sequential-move game between an entrant and an incumbent, it's essential to evaluate the potential strategies and outcomes for both players. In this scenario, the entrant can succeed by carefully analyzing the incumbent's position and implementing a strategic plan that mitigates potential barriers to entry. The goal of the game is for a new entrant to successfully enter an industry and coexist with the incumbent, while increasing the quantity demanded for the industry to allow both firms to profit. The first move for the entrant is to publicly express interest in entering the incumbent's industry. The incumbent can either resist the entrant's entry by reducing prices or threatening to do so, or promise to beat prices to successfully deter entry. However, cutting prices goes against the incumbent's goal of maximizing profits. The entrant will only take the leap into the industry if the threat of the incumbent is low, but not if action looms. Both parties must assess their best choices to get to where they want to go. The incumbent may resist entry through marketing or product enhancements to delay market share gain. The incumbent can also control the game through innovative patents that require licensing fees or royalties, allowing for direct negotiation with the entrant. The Nash Equilibrium occurs when competitors implement strategies that provide the best responses to their counterparts. For example, if the incumbent allows the entrant to enter, the entrant will calculate the maximum quantity demanded to maximize profits. The incumbent will then recalculate their maximum quantity demanded to determine their new profit maximization. The best outcome is to innovate and create industry demand for both parties. If the entrant does not stay, overall industry demand has been raised, which can justify the incumbent's decision to accommodate the entrant to keep prices profitable.

Discover more documents: Sign up today!

Unlock a world of knowledge! Explore tailored content for a richer learning experience. Here's what you'll get:

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Related Documents

PBHE 315_Week 7_1.png

5.docx

4.docx

Raising the Rate of Minimum Wage.docx

3.docx

Hardest Questions from test 2.pdf

Tutorial Week 5.pdf

TYLERGRAYMARK4350_Exam.1.Part.1_Spring.2021.docx

Finance Final.docx

Supply Chain Homework No 4 (002703664).pdf

Homework 1.xlsx

Practice Questions Midterm 1.docx

Recommended textbooks for you

Managerial Economics: Applications, Strategies an...

Economics

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:Cengage Learning

Microeconomic Theory

Economics

ISBN:9781337517942

Author:NICHOLSON

Publisher:Cengage

Managerial Economics: A Problem Solving Approach

Economics

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Cengage Learning

Economics:

Economics

ISBN:9781285859460

Author:BOYES, William

Publisher:Cengage Learning

Micro Economics For Today

Economics

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Cengage,

Economics For Today

Economics

ISBN:9781337613040

Author:Tucker

Publisher:Cengage Learning

SEE MORE TEXTBOOKS

Recommended textbooks for you

Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Microeconomic Theory
Economics
ISBN:9781337517942
Author:NICHOLSON
Publisher:Cengage
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Economics:
Economics
ISBN:9781285859460
Author:BOYES, William
Publisher:Cengage Learning
Micro Economics For Today
Economics
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Cengage,
Economics For Today
Economics
ISBN:9781337613040
Author:Tucker
Publisher:Cengage Learning