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7) Technology choice and entry You are considering launching a cable network in a local market. Currently there is one incumbent, CN. Your technology has
7) Technology choice and entry You are considering launching a cable network in a local market. Currently there is one incumbent, CN. Your technology has the same service characteristics as CN. You incur a fixed cost of $1000 for running the network and a variable cost of $20 per customer. CN, on the other hand, has a choice of technologies, with identical service characteristics but different cost structures. You have to decide whether to enter and, if so, what price to set for your service. CN will then set its own price in response to yours. Please find your optimal decisions under the following 3 scenarios, which all have the same structure but differ (only) in the cost structure of CN. a)What happens when the incumbent's cost structure changes? What is driving this outcome? b)lf you were the incumbent and there was no threat of entry, which cost structure would you choose? c)If you were the incumbent and there IS a threat of entry, which cost structure would you choose? How can you accomplish that in practice
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