Player 1 is an Internet service provider and Player 2 is a potential customer. They consider entering into a contract of service for a period of time. The provider decides between two levels of service: High or Low. The potential customer decides whether to Buy or Not Buy. When the potential customer calls customer service, the Internet service provider makes the initial offer. The potential customer then decides whether to Buy or Not Buy. Let’s say that the interaction ends after the potential customer makes their decision.1. Please set up the extensive form according to the outcome if the Internet service provider offers High and the potential customer buys, the Internet service provider makes off with 2, and the customer receives 2.2. Please solve for the SPNE.3. Are there any non-credible threats? Why might this be, or why not? Player 1 is an Internet service provider and Player 2 is a potential customer. They considerentering into a contract of service for a period of time. The provider decides between two levelsof service: High or Low. The potential customer decides whether to Buy or Not Buy. When thepotential customer calls customer service, the Internet service provider makes the initial offer.The potential customer then decides whether to Buy or Not Buy. Let's say that the interactionends after the potential customer makes their decision.a. Please set up the extensive form according to the outcome if the Internet service provideroffers High and the potential customer buys, theInternet service provider makes off with 2, and thecustomer receives 2.b. Please solve for the SPNE.c. Are there any non-credible threats? Why might this be, or why not?

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Answered: Player 1 is an Internet service…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Player 1 is an Internet service provider and Player 2 is a potential customer. They consider entering into a contract of service for a period of time. The provider decides between two levels of service: High or Low. The potential customer decides whether to Buy or Not Buy. When the potential customer calls customer service, the Internet service provider makes the initial offer. The potential customer then decides whether to Buy or Not Buy. Let’s say that the interaction ends after the potential customer makes their decision.

1. Please set up the extensive form according to the outcome if the Internet service provider offers High and the potential customer buys, the Internet service provider makes off with 2, and the customer receives 2.

2. Please solve for the SPNE.

3. Are there any non-credible threats? Why might this be, or why not?

Player 1 is an Internet service provider and Player 2 is a potential customer. They consider
entering into a contract of service for a period of time. The provider decides between two levels
of service: High or Low. The potential customer decides whether to Buy or Not Buy. When the
potential customer calls customer service, the Internet service provider makes the initial offer.
The potential customer then decides whether to Buy or Not Buy. Let's say that the interaction
ends after the potential customer makes their decision.
a. Please set up the extensive form according to the outcome if the Internet service provider
offers High and the potential customer buys, theInternet service provider makes off with 2, and the
customer receives 2.
b. Please solve for the SPNE.
c. Are there any non-credible threats? Why might this be, or why not?

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