whether AA enters and whether BB sets a low price or a high price: BB High Price Low Price BB makes BB makes $3 million S1 million Enter AA makes AA makes S2 million $1 million AA BB makes BB makes S7 million $2 million Do not enter AA makes AA makes zero zero Fully explain your answers: a. Does either company have a dominant strategy? b. Does your answer to part (a) help you figure out what the other player should do? Wha is the Nash equilibrium? Is there only one? c. BB threatens AA by saying, “If you enter, we will set a low price, so you had better

whether AA enters and whether BB sets a low price or a high price: BB High Price Low Price BB makes BB makes $3 million S1 million Enter AA makes AA makes S2 million $1 million AA BB makes BB makes S7 million $2 million Do not enter AA makes AA makes zero zero Fully explain your answers: a. Does either company have a dominant strategy? b. Does your answer to part (a) help you figure out what the other player should do? Wha is the Nash equilibrium? Is there only one? c. BB threatens AA by saying, “If you enter, we will set a low price, so you had better

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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