Considering entering a market dominated by monopolist

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You are considering entering a market dominated by a monopolist. You currently earn $0 economic profits, while the monopolist earns $5. If you enter the market and the monopolist engages in a price war, you will lost $5 and the monopolist will earn $1. If the monopolist doesn’t engage in a price war you will each earn profits of $2.

a. There are two possible equilibria or solutions to this game. What are they?

b. Will you enter? Why or why not?

Reference no: EM131071682

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