N1

Nokia and Motorola are considering launching a new version of their respective phone handsets. The choices for each firm are to Enter or to Wait. The timing of the game is follows. First, Motorola will choose either Enter or Wait. Second, having observed the choice of Motorola, Nokia will make its choice of Enter or Wait. The payoffs are as follows. If both firms choose to Enter, the payoff is 2 to each firm. If both firms choose to Wait, the payoffs are 4 to Motorola and 5 to Nokia. If Motorola Enters and Nokia Waits, the payoffs are 4 to Motorola and 8 to Nokia. Finally, if Motorola Waits and Nokia Enters, the payoffs are 7 and 6 to Motorola and Nokia, respectively. In the subgame perfect equilibrium (or equilibria) what is the outcome of the game? Choose all that apply.

A) Motorola waits, and Nokia enters

B) Motorola enters and Nokia enters

C) Motorola enters and Nokia chooses wait

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