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Unformatted text preview: normal form matrix. The incumbent is deciding whether to invest in new technology to keep out challengers. The challenger is deciding whether to enter the incumbent’s market. Challenger Enter Don’t Enter Incumbent Invest 1, 2 0, 0 Don’t Invest 0, 0 2, 1 a. Suppose the incumbent was able to move first. Draw the game tree below. What is the rollback equilibrium? b. Suppose the challenger has the first move. Draw the game tree below. How does the rollback equilibrium change? Explain....
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This test prep was uploaded on 04/22/2008 for the course ECON 242 taught by Professor Nonnenmacher during the Spring '06 term at Allegheny.
- Spring '06