Question
Suppose AMD is considering cloning Intel's latest CPU chip. If AMD enters Intel's market, Intel can play Mean, expand its output, drop prices, and try
Suppose AMD is considering cloning Intel's latest CPU chip. If AMD enters Intel's market, Intel can play Mean, expand its output, drop prices, and try to make AMD's profit as small as possible or play Nice by cutting back its output and sharing the market. AMD and Intel both know that after all moves are complete, the time- discounted profits of future chip production in billions of dollars are 5 for AMD and 3 for Intel, if AMD enters and Intel plays Mean 7 for AMD and 6 for Intel, if AMD enters and Intel plays Nice 0 for AMD, if AMD does not enter 12 for Intel, if AMD does not enter and Intel plays Mean 22 for Intel, if AMD does not enter and Intel plays Nice
Assuming Intel moves first, draw the game tree for this strategic situation. What is the Nash equilibrium for sequential play?
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