Question
The high tech vaccuum cleaner market is dominated by a firm called Gyson, however a new firm SoKlean, is considering entering the market. If SoKlean
The high tech vaccuum cleaner market is dominated by a firm called Gyson, however a new firm SoKlean, is considering entering the market. If SoKlean enters Gyson can either accommodate the entry (accept a decrease in market share) or fight to preserve its dominance by engaging in aggressive price competition. If Gyson accommodates entry, SoKlean can expect to earn profits of $10 million but if Gyson fights entry, SoKlean can expect to lose $20 million. Gyson currently earns $30 million but would earn $10 million in a duopoly with SoKlean. Fighting the entry of SoKlean would result in profits of $2 million. a. Draw the extensive form game between Gyson and SoKlean. b. What does your analysis of this game suggest that SoKlean should do? Explain
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