15-6 Entry Game with Withdrawal In the text, we considered a sequential-move gamein which an entrant...

15-6 Entry Game with Withdrawal

In the text, we considered a sequential-move gamein which an entrant was considering entering anindustry in competition with an incumbent firm(Figure 15.1). Consider now that the entrant, iffought, has the possibility of withdrawing fromthe industry (at a loss of 1 for the entrant and again of 8 for the incumbent), or staying (at a lossof 5 for each player). What is the equilibrium ofthis game? Discuss if the entrant is better off withor without the ability to withdraw.

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orchestra answered 1 year ago

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