Game Theory Critical Thinking
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Given the following payoff matrix, ( a) indicate the best strategy for each firm. ( b) Why is the entry-deterrent threat by firm A to lower the price not credible to firm B? ( c) What could firm A do to make its threat credible without building excess capacity? (Refer to Tables Sheet)
NOTE:
P10(a):The strategies for firm A are low price and high price and the strategies for firm B are enter and don't enter. What is the best (optimal) strategy for each firm?
P10(b) is asking whether firm A would use the low price as a threat if firm B enters?
Firm B
Enter Don't Enter
Firm A Low Price (3,-1) (3,1)
High Price (4,5) (6,3)
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The expert examines game theory critical thinking. The strategies are provided.
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Chapter 11
Problem 10
Given the following payoff matrix, (a) indicate the best strategy for each firm. (b) Why is the entry-deterrent threat by firm A to lower the price not credible to firm B? (c) What could firm A do to make its threat credible without building excess capacity? (Refer to Tables Sheet)
NOTE: ...
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- BSc, University of Bucharest
- MSc, Ovidius
- MSc, Stony Brook
- PhD (IP), Stony Brook
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