Two firms are considering expanding into a new market. Firm 1 is larger (both firms are already present in the industry). Both firms have the option of entering, but there are fixed costs of entering the new market (these are built into the payoffs below).

To help think about which firm enters, consider the following sequential-move game. The payoffs are the firms' total profits (new and existing markets). Firm 1's profits are shown first, and Firm 2's profits are shown second.

Enter Don't 2 2 Enter Don't Enter Don't 2,0 6.1 3, 4 3, 1