Situation One (15 points, 5 points each) A cartel faces entry by a potential entrant. The cartel threatens a price war. The payoff matrix is shown: Potential Entrant (PE) Enter Stay Out Price War (-30 , -500) , -400) Cartel (CL) No Price War (+40 , -60) (0 , 0) (Potential entrant's payoff, cartel's payoff) A) The cartel's threat of a price war is: i) Credible, because the PE's dominant strategy (DS) is to stay out. ii) Not credible because the PE's DS is to enter, iii) Credible because the CL has DS to launch a price war. iv) Not credible because the CL has DS to not launch a price war. v) Not determinable, B) You predict the outcome to be: i ) (-30, -500) ii) (0, -400) iii) (+40 , -60) iv ) (0 , 0 ) v) indeterminate C) If the cartel got a $30 license fee enacted for all PE's, how would this affect the outcome? i ) There would be no change to the outcome. ii ) The PE would have a DS. iii) The PE would not enter. iv) The CL's DS would change. v) The CL would no longer have a DS