Week 6

 

In our Managerial Economics textbook, we consider a sequential-move game in which an entrant is considering entering an industry in competition with an incumbent firm (see Figure 15-1). There are several possibilities of how this sequential game will be played. We want to use the Froeb rule of “look ahead and reason back.”

Post a Response

For your discussion post, use Figure 15-1 from the textbook as your starting point to address the following:

  1. Play and analyze the game. Can, and how does, the entrant succeed? Is the incumbent ever in control of this game? What is the Nash equilibrium?
    • You may wish to review the old game known as Duopoly, as well as Antoine-Augustin Cournot, to help inform your post.

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Practice1 INPUT DATA Forecasted annual sales growth 10% COGS/SALES 55% SG&A/SALES 20% DEPRECIATION/Gross PPE 8% INTEREST RATE 10% TAX

Practice1 INPUT DATA Forecasted annual sales growth 10% COGS/SALES 55% SG&A/SALES 20% DEPRECIATION/Gross PPE 8% INTEREST RATE 10% TAX RATE 35% CASH/SALES Plug ACCOUNT RECEIVABLE/SALES 35% INVENTORY/SALES 85% ACCOUNTS PAYABLE/SALES 14% OTHER CURRENT LIAB/SALES 25% GROSS PPE 70% of sales if Sales <=45000 27000+0.7(Sales-40000) if 45000< Sales <= 50000 38500+0.3(Sales-50000)