Ammar's. Because there is no direct competition at the stall, the seller can sell his kebab for $4 and earn $800 per day. However, Anwar, a Kebab vendor, is considering establishing up shop just down the road from Ammar's in the University of London market. When confronted by Anwar, Ammar has two options: sell at the same high price ($4) or charge a low price below the cost in the hopes of discouraging Anwar from setting up his stall. The game and payoffs for the standard game between Ammar and Anwar are listed below in the image attached. a. Draw the extensive form of this game using a game tree. Find the sub perfect Nash equilibrium (SPNE) from this game tree. Justify your answer clearly
Assume there is just one kebab stall selling kebab to students at the University of London, which we will call Ammar's. Because there is no direct competition at the stall, the seller can sell his kebab for $4 and earn $800 per day. However, Anwar, a Kebab vendor, is considering establishing up shop just down the road from Ammar's in the University of London market. When confronted by Anwar, Ammar has two options: sell at the same high price ($4) or charge a low price below the cost in the hopes of discouraging Anwar from setting up his stall. The game and payoffs for the standard game between Ammar and Anwar are listed below in the image attached.
a. Draw the extensive form of this game using a game tree. Find the sub perfect Nash equilibrium (SPNE) from this game tree. Justify your answer clearly.
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