Competition with an incumbent firm

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In the text, we considered a sequential move game in which an entrant was considering entering an industry in competition with an incumbent firm ( Figure 15- 1). Consider now that the entrant, if fought, has the possibility of withdrawing from the industry ( at a loss of 1 for the entrant and a gain of 8 for the incumbent), or staying ( at a loss of 5 for each player). What is the equilibrium of this game? Discuss if the entrant is better off with or without the ability to withdraw.

Reference no: EM131002239

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