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An incumbent, firm1, faces apotential entrant andcan prepurchase capacity in an attempt todeterentry. Theentrant, firm2, observes theamount ofcapacitychosenby firm 1 before its entrydecision. Eachfirmneeds aunit

An incumbent, firm1, faces apotential entrant andcan prepurchase capacity in an attempt todeterentry. Theentrant, firm2, observes theamount ofcapacitychosenby firm 1 before its entrydecision. Eachfirmneeds aunit ofcapacitytoproduceaunit ofoutput, andcapacity costs 1 per unit. Market demand isp=5

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