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26) Refer to the game tree you chose on Question 24. Consider the endings (hollow circles) following the choice of whether to enter or not

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26) Refer to the game tree you chose on Question 24. Consider the endings (hollow circles) following the choice of whether to enter or not by the Follower. For each of those end- ings, note the resulting market structure (monopoly or Bertrand?). Next, write what are the marginal costs of each firm operating, based on previous regulatory decisions (hint: a firm will only use clean technologies if required by regulations). Use that to calculate the profits of the Follower in each ending (remember the fixed cost). Based on that calculation, what do you think is the optimal strategy for the Follower? (a) Enter (FE) in all circumstances. (b) To make a payment of x - 6 to the regulator. (c) Not Enter (FN) in all circumstances. (d) Make a payment of x - 6 and Not Enter (FN). (e) Enter (FE) in all histories where there is no environmental regulation (NR); and Not Enter (FN) in all histories where there is environmental regulation for new firms (RE)

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