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i) Two firms, A and B, are operating in a UK textile industry under duopolistic condition and choose to either produce at "High" price or a "Low" price. Suppose you are the manager of firm A and you are required to advise the Board of Directors about the following strategic options:
a) If Firm B chooses High Price, what is Firm A's best strategy and why?
b) What is best outcome for both Firm A and Firm B and how can it occur?
c) What measures could you adopt to convince Firm B that you will abide to the agreement?
d) Consider that both firms produce at "Low" price and each firm make a loss of 15. In that context, can you explain this outcome?
e) What is the Nash equilibrium for both firms? Illustrate
ii) How does an incumbent firm succeed in deterring entry into the market by potential competitors? Use a Games theoretical approach to support your answer.
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thoery explanation
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