Write down the extensive form game

Reference no: EM132207615

Question: Forbes is a monopoly manufacturer who can use laborers to pack his product into boxes or use an expensive set of robotic arms which will reduce the number of workers he hires, but increase his fixed cost. His profit is $900 without the machine and $500 if he buys the machine. KÃ¡roly is an entrepreneur and is wondering if he should enter this mar- ket (which would turn it from a monopoly into a duopoly). If he does not enter, he earns $0. If Kroly enters, Forbes earns $400 if he uses labor and $132 with the robot, while Karoly earns $300 when Forbes uses labor and makes a loss of $36 if Forbes buys the robotic arms

(a) Draw the normal-form game with Forbes as the row player who chooses between L (use labor) and R (use robot), and KÃ¡roly plays S (stay out) or E (enter)

(b) Do either Forbes or Karoly have a dominant strategy? Explain.

(d) Consider the sequential game where Forbes chooses L or R first followed by KÃ¡roly choosing S or E. Write down the extensive- form game and find the SPNE.

Reference no: EM132207615

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