d) What does the sequential move game look like for the two firms, where Pepsi moves...

d) What does the sequential move game look like for the two firms, where Pepsi moves first, what is the equilibrium and why?

Expert Solution

Ans.

- Sequential move games expect players to consider the future outcomes of their present move before picking their present activity. Examination of sequential move games for the most part requires the production of a game tree. In reverse acceptance is a strategy by which we can discover the equilibrium of such games.

- The leader firm chooses its output first and then the follower firm chooses after observing the leader’s output. It can be shown that the leader firm has a distinct advantage, being a first mover.

- The leader can aggressively overproduce to force the follower to scale back its production or even punish or eliminate the weaker opponent.

- The leader earns more while the follower earns less

- The important conclusion is that the optimal strategy of the firm depends on what its adversary does. The price and marginal revenue the firm receives for its product depend on both its decisions and its adversary’s decisions.

Rahul Sunny answered 2 years ago

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