Little Kona is a small coffee company that is considering entering a market dominated by Big Brew. Each company’s profit depends on whether Little Kona enters and whether Big Brew sets a high price or a low price:

Big Brew threatens Little Kona by saying, ‘If you enter, we’re going to set a low price, so you had better stay out.’ Do you think Little Kona should believe the threat? Why or why not? What do you think Little Kona should do?