A firm you has to decide whether or not to enter the market

Reference no: EM13454553

A firm (You) has to decide whether or not to enter a market which is serviced by a monopolist. Currently the monopolists earns $6 economic profits, while you earn $0. If you enter the market and the monopolist doesn't engage in a price war, you will each earn profits of $3. If the monopolistengages in a price war, you will lose $6 and the monopolist will earn $2.

(a) Write out the extensive form of the above game.

(b) What is the Nash equilibrium (equilibria) for this game? Explain.

(d) If you were the potential entrant, would you enter? Explain why or why not.

Reference no: EM13454553

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