Figure 11.2
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 11.2 shows the decision tree for this game.
-Refer to Figure 11.2.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 offers 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.
Correct Answer:
Verified
Q152: Figure 11.1 Q153: A sequential game can be used to Q154: Decision trees are commonly used to illustrate Q155: In many business situations one firm will Q157: Decision trees can only be used to Q161: Which of the following statements is generally Q205: A subgame-perfect equilibrium is a Nash equilibrium Q206: What is a subgame? Q212: All of the following are ways by Q220: A subgame is a simultaneous game embedded![]()
A)It is one that
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