Consider an Entry Game in a Particular Market

question 5

Multiple Choice

Consider an entry game in a particular market.NW Coffee decides whether to Enter or Not Enter a market.If NW Coffee chooses Not Enter it gets a payoff of 10 and Dunkin' Donuts (DDs) gets a payoff of 30.If NW Coffee enters, DDs can choose to either Punish or to Cooperate.If DDs chooses Punish following Enter, the payoffs are 5 to NW Coffee and 10 to DDs.If DDs chooses to Cooperate following Enter, NW Coffee gets a payoff of 20 and DDs gets 20.What are the subgame (credible) equilibria?

• A)(Enter, Punish) and (Not Enter, Cooperate).
• B)(Enter, Cooperate).
• C)(Not Enter, Punish).
• D)(Not Enter, Punish) and (Enter, Cooperate).
• E)None of the above.