The Diagram Shows the Extensive Form Version of a Strategic

question 205

Multiple Choice

The diagram shows the extensive form version of a strategic game between the two nationally dominant coffee sellers, Corporate Coffee and Jumbo Java, both of whom are considering opening coffee shops in a new town. The payoffs represent, in thousands per month, the profit (or loss) the firm will realize from its decision. Which of the following statements is true about this game?

• A)It would be a Stackelberg duopoly if both firms gained from entering the new market.
• B)It represents a Stackelberg duopoly.
• C)It would be a Stackelberg duopoly if Jumbo Java could prevent Corporate Coffee's entry into the market.
• D)It would be a Stackelberg duopoly if the two firms moved simultaneously.

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Definitions:

Perpetual Inventory System

An accounting method that records the sale or purchase of inventory immediately through computerized point-of-sale systems and Enterprise Resource Planning systems.

Periodic Inventory System

An inventory accounting system where updates to inventory levels are made at specific intervals, rather than continuously.

Purchases Discounts

Purchases discounts are reductions in price given by suppliers to buyers for early payment of invoices.

Credit Memo

A document issued by a seller to a buyer, reducing the amount that the buyer owes to the seller typically due to a return or an error in billing.