This is the answer..plz write in handwrittenHere, the given decision tree showsthat player 1 moves either to enter ornot to enter, while player 2 has twooptions to choose that are concedeand price war.When analyzing the given information,it can be seen that player 1 will surelyenter the market as it will give himhigher payoff than the payoff when hedoes not enter as does not enter giveshim $1 billion, while entry will givehim either $2 billion or $1.5 billion.Therefore, player 1 will enter. After theentry of player 1, player 2 has anincentive to choose to concede as itwill give him the payoff of$1.5 billion,while price war will give him $1 billion.Therefore, the outcome of this gamewould be: (Enter, Concede)

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Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 6PA

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