Entry Deterrence Consider the entry deterrence game of Chap. 1, of which the extensive form is reproduced in Fig. 4.11. (a) Write down the strategic form of this game. (b) Determine the Nash...

Entry Deterrence

Consider the entry deterrence game of Chap. 1, of which the extensive form is reproduced in Fig. 4.11.

(a) Write down the strategic form of this game.

(b) Determine the Nash equilibria (in pure strategies). Which one is the backward induction equilibrium? Which one is subgame perfect? In which sense is the other equilibrium based on an ‘incredible threat’?

Fig. 4.11