Unformatted text preview: the incumbent continues to monopolize the market. Assume that the entrant will enter only if it can make positive proﬁts, and that neither ﬁrm discounts its proﬁts in period 2. Assume further that market demand in each period is D ( p ) = 9-p . a. In the absence of the potential entrant, what technology would the incumbent select? With this technology of the incumbent, would the entrant enter? If yes, with which technology? c. Is there any technology the incumbent could take in period 1 that would deter entry by the entrant? If yes, what range of technologies can accomplish this? d. Given the threat of entry, what is the course of action for the incumbent, and how does the entrant respond in subgame-perfect equilibrium? 2. Exercise 12.C.4. 3. Exercise 12.C.9. 4. Exercise 12.D.4. 1...
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- Fall '09
- Economics, entrant, potential entrant, incumbent monopolist