3.1 A store in a shopping mall can pay the owner of the mall $70,000 to prevent a competing store from opening. Without entry, the incumbent store’s profit is i = +200,000. With entry, its duopoly profit would be $120,000, and the entrant would earn a profit of $80,000. Will the incumbent pay for exclusivity?

Will entry occur? Use a game-tree diagram to answer these questions.