3.14 A gas station at a rest stop along the highway can pay the owner of the rest stop $40,000 to prevent a second station from opening. Without entry, the incumbent gas station’s profit is πi = $100,000.

With entry, its duopoly profit would be $45,000 and the entrant would earn a profit of $30,000.

Will the incumbent pay for exclusivity? Will entry occur? Use a game-tree diagram to answer these questions.