In the first stage of a game between an incumbent and a potential rival, the incumbent builds its plant using either an inflexible technology that allows it to produce only a (large) fixed quantity, or a flexible technology that allows it to produce small or large quantities. In the second stage, the potential rival decides whether to enter. With the inflexible technology, the incumbent makes so much output that its threat to limit price is credible, as the following game tree illustrates. What strategy (technology) maximizes the incumbent's profit?