Answered: Entry Game with Identical Companies…

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter9: Competition And Monopolies

Section: Chapter Questions

Problem 17AA

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Question

Suppose the five potential entrants are identical in that each faces the same entry cost of $300. Given the total number of companies in the market, the accompanying table reports a company’s net profit (or payoff) if it enters. As before, the payoff from staying out of the market is zero, and each company can choose either enter or do not enter. Find all Nash equilibria.

Entry Game with Identical Companies
Number
Gross Profit
Net Profit
of Firms
per Firm
per Firm
1
1,000
700
2
400
100
250
-50
4
150
-150
100
- 200
LO

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