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Problem 2: Consider the following game: there are two players, an incumbent {denoted I] and a potential entrant {denoted E] to the market. The entrant
Problem 2: Consider the following game: there are two players, an incumbent {denoted I] and a potential entrant {denoted E] to the market. The entrant has two actions: it can either enter the market in which the incumbent operates. or not enter. The incumbent has two actions: it can either ght the entrant, or accommodate. The payoffs are as follows: if E enters and I ghts1 E gets -1 annil'getsi. It'Edossnot enter,Igets 1+1]flora:l1},rofitstwonactions1 andE gets I]. IfE enters and I accommodates, then both get the payroll: 5. 1. Suppose that both players act slmoltanemtsly. Depict the game with the help of a game matrix. Find the Nash equilibria [in pure strategies}. 2. Now suppose that E moves rst1 and then the I follows. Depict this sequential game with the help of a game tree. 'What is the equilibrium of the game? [remember {rem the lecture that we have to apply-r "backward reasoning" - start from the end and move to the start of the game} 3. Suppose that hefore the game starts, I announces: \"If E enters, than I always ght" . Does it oonvinee E in a simultaneous move genre? Does it oonvhme E in the sequential garnetIII "Why
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