What is the sub game nash equilibrium of this game

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Reference no: EM13802611

Before entry, an incumbent earns a monopoly profit of Pm = 10 million. If entry occurs, the incumbent and an entrant each earn the duopoly profits Pd = 3 million.

Suppose the incumbent can induce the government to require all firms to install pollution-control devices that cost each firm 4 million.

What is the sub game Nash Equilibrium of this game?

{Incumbent: convince the government to install; Entrant: do not enter}

{Incumbent: convince the government not to install; Entrant: do not enter}

{Incumbent: convince the government to install; Entrant: enter}

Reference no: EM13802611

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