Chapter 14Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedStrategyChapter 14Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 14.01 Simultaneous Entry GameJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved Figure 14.01 Whether an Incumbent Pays to Prevent EntryIncumbentEnterDo not enter(m, $0)(m – b, $0)(d, d = R – F )Do not paySecond stageFirst stagePay for exclusive rights (entry is impossible)Entrant(i, e)Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 14.02 Noncredible ThreatIncumbent($300, $300)(–$100, –$100)Cournot outputLarge output(i, e)Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 14.03 Game Trees for the Deterred Entry and Stackelberg EquilibriaIncumbentEnterDo not enter(b) Entrant ’s Fixed Cost Is $16.($900, $0)($450, $209)Accommodate (qi = 30)Accommodate (qi = 30)EnterDo not enter($416, $0)($208, $0)Deter (qi = 52)EntrantEntrantIncumbentEnterDo not enter(a) Entrant’s Fixed Cost Is $100.($900, $0)($450, $125)EnterDo not enter($800, $0)($400, $0)Deter (qi = 40)EntrantEntrant(i, e)Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 14.02 Entrant’s Best Response and ProfitJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 14.04 Cournot and Stackelberg Equilibriaqe, Unitsper periodqi, Units per periodEntrant ’sbest-response curveIncumbent ’s best-response curveesec(a) Best-Response Curves0 3020 6015203060i, $ per periodqi, Units per periodi(b) Incumbent’s Profit0 3020 60450400Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved(a) EntrantFigure 14.05 Incumbent Commits to a Large Quantity to Deter Entryqe, Units per periodq, Units per periodEntrant ’s best-response curveesed’s Best-Response Curve0 30 40 60153010πi, Incumbent’sProfit per period, $q, Units per periodims(b) Incumbent’s Profit0 30 40 60800900450Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 14.06 Incumbent Loss If It Deters Entryqe, Units per periodqi, Units per periodEntrant’s best-response curvees(a) Entrant ’s Best-Response Curve0 30 52 601530i, $ per periodqi, Units per periodims(b) Incumbent ’s Profit0 30 52 60416900450Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 14.07 Investment Game TreeIncumbentEnterDo not enter($900, $0)($400, $300)Do not investEnterDo not enter($500, $0)($132, –$36)InvestEntrantEntrant(i, e)Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 14.08 Raising-Costs Game TreeIncumbentEnterDo not enter($10, $0)($3, $3)Do not raise costsEnterDo not enter($6, $0)(–$1, –$1)Raise costs $4EntrantEntrant(i, e)Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedApplication Evidence on Strategic Entry DeterrenceJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 14.09 AdvertisingPrice of Coke,pc, $ per unitBQc, Units of Coke per year019175Q2 = 28 68 76Q1 = 24MR1MR2D2D1p2 = 12p1 = 11e2e11MC = ACJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 14.10 Shifts in the Marginal Benefit of AdvertisingMarginal benefit,marginal cost, $ per unitA1A2Minutes of advertising time purchased per dayMB2MB1MCJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 14.03 Advertising
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