Two firms simultaneously decide whether or not to enter a market, and if yes, when to enter a market. The market lasts for 3 periods: starting in period 1 and ending in period 3. A firm that chooses to enter can enter in any of the three periods. Once a firm enters the market in any period it has to stay in the market through period 3. In any period t that the the firm is not in the market, it earns a zero profit. In any period t, if a firm is a monopolist in the market, it makes the profit 10t-24. In any period t if a firm is a duopolist in the market it makes a profit of 71-24. A firm's payoff in the game is the total profit it earns in all the periods it is in the market, or zero if it never enters the market. Is there a Nash equilibrium in which both firms enter the market?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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Two firms simultaneously decide whether or not to enter a market, and if yes, when to enter a market. The market lasts for 3
periods: starting in period 1 and ending in period 3. A firm that chooses to enter can enter in any of the three periods. Once a
firm enters the market in any period it has to stay in the market through period 3.
In any period t that the the firm is not in the market, it earns a zero profit.
In any period t, if a firm is a monopolist in the market, it makes the profit 10t–24.
In any period t if a firm is a duopolist in the market it makes a profit of 71-24.
A firm's payoff in the game is the total profit it earns in all the periods it is in the market, or zero if it never enters the market.
Is there a Nash equilibrium in which both firms enter the market?
Transcribed Image Text:Two firms simultaneously decide whether or not to enter a market, and if yes, when to enter a market. The market lasts for 3 periods: starting in period 1 and ending in period 3. A firm that chooses to enter can enter in any of the three periods. Once a firm enters the market in any period it has to stay in the market through period 3. In any period t that the the firm is not in the market, it earns a zero profit. In any period t, if a firm is a monopolist in the market, it makes the profit 10t–24. In any period t if a firm is a duopolist in the market it makes a profit of 71-24. A firm's payoff in the game is the total profit it earns in all the periods it is in the market, or zero if it never enters the market. Is there a Nash equilibrium in which both firms enter the market?
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