John owns a company that is the sole provider of sailboat tours in Ithaca. Nancy is an avid sailor and believes she could make decent profits by competing with John and opening a tour company of her own. John has enjoyed his monopoly over sailboat tours in Ithaca, and says that if Nancy enters, he will drop his prices until she is forced out of the market. After some market research, Nancy estimates the following:

• If she enters and John maintains his prices, she will make $25,000 in profit and he will make $45,000 in profit, but if he lowers his prices, she will make negative profits of $10,000 and he will make profits of $10,000.
• If she decides to stay out and John maintains prices, he will earn $70,000 in profits, while if for some crazy reason he decides to lower his prices, he would make $45,000 in profits.

1. Map out the game tree for Nancy and John's Decision including their choices and payouts.
2. Is John's threat effective? Is it credible?