Pays for exclusive right entry is impossible 10 0 4 4

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Pays for exclusive right Entry is impossible ( 10, 0 ) (4, 4 F) (10 b, 0) Incumbent Don’t pay for exclusive right Entrant
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23 Entry Deterrence Blockaded Entry : If F > 4, the potential entrant would not enter even if the incumbent fails to get an exclusive right. The Nash equilibrium is (Don’t Pay, Don’t Enter). Deterred Entry : If F < 4 and 10 b > 4, then Incumbent will pay $b to exclude the potential entrant. The Nash equilibrium is (Pay, Don’t Enter). Accommodated Entry : If F < 4 and 10 b < 4, the Nash equilibrium is (Don’t Pay, Enter).
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24 Investing to Deter Entry An incumbent (monopoly) decides whether or not to invest in capital that reduces its MC of production, and hence produce more. Looking at the incumbent’s choice, the potential entrant decides whether or not to enter the market. If incumbent doesn’t invest, the potential entrant enters ($4 > 0). If the incumbent invests, the entrant doesn’t enter (0 > -1).
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25 Investing to Deter Entry Entrant Entrant Incumbent No Inv Invest NO Enter NO Enter 10, 0 4, 4 2, - 1 8, 0 Inc, Ent Out of the two possibilities (blue lines), Incumbent is better off choosing Invest. So (Invest, Don’t Enter) is the Nash Equilibrium.
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