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

question 57

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 non-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 non-subgame Nash equilibrium to this game.

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Definitions:

Demand For Tomatoes

The desire and ability of consumers to purchase tomatoes at various prices, influenced by factors such as income, taste, and price of substitutes.

Lettuce Crop

Horticultural practice involving the cultivation of lettuce for consumption as a leafy green vegetable.

Flooding

An overflow of water that submerges land that is usually dry, usually caused by heavy rainfall or other hydrological phenomena.

Price Restrictions

Regulations or limitations placed on the pricing of goods and services, often to control inflation or protect consumers.