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Problem 6 (10 marks) Consider the following predation game involving an incumbent and a potential entrant. Payoffs are written with the potential entrant's profits listed
Problem 6 (10 marks) Consider the following predation game involving an incumbent and a potential entrant. Payoffs are written with the potential entrant's profits listed first and the incumbent's listed second. (The profit numbers represent discounted values over the life of the firms.) Stays Out (0, 10) Potential Entrant Predates (-5, 0) Enters Incumbent Accommodates (4, 6) a. What is the equilibrium of this game? b. Would the equilibrium be different if the (-5, 0) payoff were instead (-5, 8)
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