In the text, we consider a sequential-move game in which anentrant was considering entering an industry in competition with anincumbent firm (See Figure 15-1). Consider now that the entrant, iffought, has the possibility of withdrawing from the industry (at aloss of 1 for the entrant and a gain of 8 for the incumbent), orstaying at a loss of 5 for each player). What is the equilibrium ofthis game? Discuss if the entrant is better off with or without theability to withdraw. I have added a diagram of the game.
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