An incumbent can commit to producing a large quantity of output before the potential rival decides whether to enter. The incumbent chooses whether to commit to produce a small quantity or a large quantity. The rival then decides whether to enter. Enter The payoffs are represented in the game treeillustrated in the figure to the right. What is the subgame perfect Nash equilibrium? (1,800,500) Rival Small O A. The Nash equilibrium is for the incumbent to produce the large quantity and for the rival to not enter regardless of the incumbent's quantity. (3,600,0) Don't enter O B. The Nash equilibrium is for the incumbent to produce the large quantity and for Incumbent the rival to enter regardless of the incumbent's quantity. OC. The game does not have a Nash equilibrium. O D. The Nash equilibrium is for the incumbent produce the small quantity and for Enter (1,600, - 80) Large Rival the rival to only enter if the incumbent produces the small quantity. (3,200,0) Don't enter O E. The Nash equilibrium is for the incumbent produce the large quantity and for the rival to only enter if the incumbent produces the small quantity.

An incumbent can commit to producing a large quantity of output before the potential rival decides whether to enter. The incumbent chooses whether to commit to produce a small quantity or a large quantity. The rival then decides whether to enter. Enter The payoffs are represented in the game treeillustrated in the figure to the right. What is the subgame perfect Nash equilibrium? (1,800,500) Rival Small O A. The Nash equilibrium is for the incumbent to produce the large quantity and for the rival to not enter regardless of the incumbent's quantity. (3,600,0) Don't enter O B. The Nash equilibrium is for the incumbent to produce the large quantity and for Incumbent the rival to enter regardless of the incumbent's quantity. OC. The game does not have a Nash equilibrium. O D. The Nash equilibrium is for the incumbent produce the small quantity and for Enter (1,600, - 80) Large Rival the rival to only enter if the incumbent produces the small quantity. (3,200,0) Don't enter O E. The Nash equilibrium is for the incumbent produce the large quantity and for the rival to only enter if the incumbent produces the small quantity.

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 5CQQ

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