Refer to the Normal-Form Game of Price Competition Shown Below

question 114

Multiple Choice

Refer to the normal-form game of price competition shown below. Firm B is the incumbent facing potential entry from its rival,firm A. Firm A's strategies consist of {entry, stay out}. Firm B's strategies are then {hard if entry; hard if stay out; soft if entry; soft if stay out}. Find the subgame Nash equilibrium to this game, if one exists.

• A) Firm A plays {stay out}; firm B plays {hard if entry}.
• B) Firm A plays {entry}; firm B plays {hard if entry}.
• C) Firm A plays {entry}; firm B plays {soft if entry}.
• D) There is no subgame Nash equilibrium to this game.

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