Consider the entry game. Now suppose five firms are considering entering a new market. Firms simultaneously decide whether to Enter or Do Not Enter. Each firm faces a different entry cost but earns the same gross profit upon entry. A firm's net profit = gross profit-its entry cost. A firm's payoff is a firm's net profit. Company A B C D E a. Entry Cost 290 210 Company A B C D E 120 110 100 Number of Companies 1 2 0 3 Derive each firm's payoff in the following table. 4 5 Number of Other Companies that Enter 1 3 2 Profit per company 1,000 400 b. Find all Nash equilibria. Make sure you justify your answer. 250 150 100 Total Industry Profit 1,000 800 750 600 500

Consider the entry game. Now suppose five firms are considering entering a new market. Firms simultaneously decide whether to Enter or Do Not Enter. Each firm faces a different entry cost but earns the same gross profit upon entry. A firm's net profit = gross profit-its entry cost. A firm's payoff is a firm's net profit. Company A B C D E a. Entry Cost 290 210 Company A B C D E 120 110 100 Number of Companies 1 2 0 3 Derive each firm's payoff in the following table. 4 5 Number of Other Companies that Enter 1 3 2 Profit per company 1,000 400 b. Find all Nash equilibria. Make sure you justify your answer. 250 150 100 Total Industry Profit 1,000 800 750 600 500

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

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

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

Chapter15: Strategic Games

Section: Chapter Questions

Problem 15.6IP

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