I2

1. Consider a sequential game between two firms, ABInbev and Dog Fishhead. ABinbev is currently the only firm in the Fargo market and Dog Fishhead is looking to ENTER. If Dog Fishhead decides to NOT ENTER ABInbev will earn $100. If Dog Fishhead decides to ENTER and ABInbev decides to FIGHT then ABinbev will earn $30 and Dog Fishhead will earn $-10. But if ABInbev ACCOMMODATES then ABInbev will earn $60 and Dogfish head will earn $25. a) Draw with game up in extensive form. b) What is the subgame perfect Nash equilibrium? c) Is ABInbev threatening to FIGHT a credible threat? Explain. d) What would need to be the minimum pay off for FIGHT to be a credible threat? Explain.1. Consider a sequential game between two firms, ABInbev and Dog Fishhead. ABinbev is currently the only firm in the Fargo market and Dog Fishhead is looking to ENTER. If Dog Fishhead decides to NOT ENTER ABInbev will earn $100. If Dog Fishhead decides to ENTER and ABInbev decides to FIGHT then ABinbev will earn $30 and Dog Fishhead will earn $-10. But if ABInbev ACCOMMODATES then ABInbev will earn $60 and Dogfish head will earn $25. a) Draw with game up in extensive form. b) What is the subgame perfect Nash equilibrium? c) Is ABInbev threatening to FIGHT a credible threat? Explain. d) What would need to be the minimum pay off for FIGHT to be a credible threat? Explain