The Payoff Table Shows the Competition Between a New Entrant

question 32

Essay

The payoff table shows the competition between a new entrant (Firm 1) and an incumbent firm (Firm 2). Determine each firm's equilibrium strategy.
$\begin{array}{l}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm } 2\\\begin{array} { | c | c | c | } \hline \text { Firm 1 } & \text { Fight } & \text { High price } \\\hline \text { Enter } & - 10,15 & 10,10 \\\hline \text { Not enter } & 0,20 & 0,20 \\\hline\end{array}\end{array}$

---

Definitions:

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases.

Controlled Variable

A factor in an experiment which is kept constant to test the relative impact of an independent variable.

Placebo Effect

The phenomenon in which a person's symptoms can improve due to their belief in the efficacy of a treatment with no therapeutic value.

Debriefing

A process of questioning and informing participants about the purpose and methods of a study after their participation is complete.