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.
$\begin{array}{l}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Firm } 2\\\begin{array} { | c | c | c | } \hline \text { Firm 1 } & \text { Fight } & \text { High price } \\\hline \text { Enter } & - 10,15 & 10,10 \\\hline \text { Not enter } & 0,20 & 0,20 \\\hline\end{array}\end{array}$

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Definitions:

Wireless Phone

A communication device that does not require a physical connection to a telephone network, often referring to mobile or cordless phones.

Next Customer

The following or upcoming client to be served or attended to in a service setting.

Probability

A measure of the likelihood that an event will occur.

Mutually Exclusive

Events or propositions that cannot both occur or be true at the same time.