Figure 14-2Xenophone (XDecleionOfferCable or DSLaserviceCableOSLGigom (0)Decision图OfferCable or DSLserviceGigsom (G)DeconOferCable or DWentserviceCableDSCableDSLX 80 millionG: 19 milionX: 54 milionG: $45 milionx 55 millionG: 16.5 milionX: 50 milion$7The government of a developing country plans to award two firms, Gigacom and Xenophone, theexclusive rights to share the market for high speed internet service. Gigacom and Xenophone canboth provide the service either via television cable lines or via direct subscriber line (DSL).Suppose the government is considering a proposal to delay one firm's entry into the market onthe grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision treefor this game.Refer to Figure 14-2. Now suppose that the government delays Xenophone's entry and Gigacommoves first, what is the likely outcome in the market?Both offer internet service via cable line: Xenophone earns a profit of $6 million and Gigacom earns aprofit of $9 million.Xenophone offers internet service via cable line and earns a profit of $4 million while Gigacom offers DSLInternet service and earns a profit of $4.5 million.Xenophone offers DSL internet service and earns a profit of $5 million while Gigacom offer internetservice via cable line and earns a profit of $65 million. OfferCable or DSLinternetserviceDSLX 18 milion& $7 millionThe government of a developing country plans to award two firms, Gigacom and Xenophone, theexclusive rights to share the market for high speed internet service. Gigacom and Xenophone canboth provide the service either via television cable lines or via direct subscriber line (DSL).Suppose the government is considering a proposal to delay one firm's entry into the market onthe grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision treefor this game.Refer to Figure 14-2. Now suppose that the government delays Xenophone's entry and Gigacommoves first, what is the likely outcome in the market?O Both offer internet service via cable line: Xenophone earns a profit of $6 million and Gigacom earns aprofit of $9 million.Xenophone offers internet service via cable line and earns a profit of $4 million while Gigacom offers DSLinternet service and earns a profit of $4.5 million.Xenophone offers DSL internet service and earns a profit of $5 million while Gigacom offer internetservice via cable line and earns a profit of $6.5 million.Both offer DSL internet service; Xenophone earns a profit of $8 million and Gigacom earns a profit of $7million.

In game theory, a decision tree is a graphical representation of a sequential decision-making…

Answered: Refer to Figure 14-2. Now suppose that…

Refer to Figure 14-2. Now suppose that the government delays Xenophone's entry and Gigacom moves first, what is the likely outcome in the market?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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