Explore BrainMass

Explore BrainMass

    Nash equilibrium

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Solve and explain

    You are considering entering a market serviced by a monopolist. You currently earn $0 economic profits, while the monopolist earns $5. If you enter the market and the monopolist engages in a price war, you will lose $5 and the monopolist will earn $1. If the monopolist doesn't engage in a price war, you will each earn profits of $2.

    a. Write out the extensive form of the above game.
    b. There are two Nash equilibria for the game. What are they?
    c. Is there a subgame perfect equilibrium? Explain.
    d. If you were the potential entrant, would you enter? Explain why or why not.

    © BrainMass Inc. brainmass.com March 6, 2023, 12:48 pm ad1c9bdddf
    https://brainmass.com/economics/game-theory/nash-equilibrium-20542

    Solution Summary

    Apply the Nash equilibrium.

    $2.49

    ADVERTISEMENT