Figure 14-2 The Government of a Developing Country Plans to Award Two

Figure 14-2

The government of a developing country plans to award two firms, Gigacom and Xenophone, the exclusive rights to share the market for high speed Internet service. Gigacom and Xenophone can both provide the service either via television cable lines or via direct subscriber line (DSL) . Suppose the government is considering a proposal to delay one firm's entry into the market on the grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision tree for this game.
-Refer to Figure 14-2.Now suppose that the government delays Xenophone's entry and Gigacom moves first, what is the likely outcome in the market?

A) Both offer Internet service via cable line; Xenophone earns a profit of $6 million and Gigacom earns a profit of $9 million.
B) Both offer DSL Internet service; Xenophone earns a profit of $8 million and Gigacom earns a profit of $7 million.
C) Xenophone offers DSL Internet service and earns a profit of $5 million while Gigacom offer Internet service via cable line and earns a profit of $6.5 million.
D) Xenophone offers Internet service via cable line and earns a profit of $4 million while Gigacom offers DSL Internet service and earns a profit of $4.5 million.