Your Managerial Economics Textbook: We Consider A Sequential

In Yourmanagerial Economicstextbook We Consider A Sequential Move Gam

In your Managerial Economics textbook, we consider a sequential-move game in which an entrant is considering entering an industry in competition with an incumbent firm. 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." Instructions For your discussion post, use Figure 15-1 from the textbook as your starting point to address the following: Can, and how does, the entrant succeed? Is the incumbent ever in control of this game? You may wish to review the old game known as Duopoly, as well as Antoine-Augustin Cournot, to help inform your post. Absolutely no plagiarism. 1/2 paragraph minimum Please follow all directions above.

Paper For Above instruction

In the context of the sequential-move game presented in the managerial economics textbook, the success of the entrant in entering an established industry hinges on strategic decision-making and foresight, guided by the Froeb rule of "look ahead and reason back." This approach involves the entrant anticipating the incumbent's responses to potential entry, considering various strategic moves and counter-moves to identify a credible plan for successful entry. The entrant's success largely depends on their ability to commit to a strategy that the incumbent perceives as threatening or unprofitable to contest, such as aggressive pricing, capacity expansion, or innovation. By carefully analyzing the incumbent’s possible reactions using backward induction, the entrant can potentially identify pathways to secure a foothold in the industry, even in the face of incumbent retaliation.

Regarding control of the game, the incumbent often retains significant influence, especially if they can preempt or deter entry through credible threats like price cuts, capacity expansion, or establishing barriers to entry. However, the incumbent’s control is not absolute—it can be challenged if the entrant successfully employs strategic moves that force the incumbent into a reactive stance, thereby shifting the balance of power. For instance, the entrant could adopt a "limit-pricing" strategy, lowering prices sufficiently to discourage entry, thus asserting control over the initial move. Over time, the game mirrors the classical duopoly models, such as Cournot competition, where each firm’s decisions are interdependent, and the strategic interplay determines outcomes. Ultimately, both players influence the course of the game, but the entrant’s success hinges on their ability to look ahead, weigh potential responses, and implement credible strategies aligned with the "look ahead and reason back" principle, which can tilt control in their favor if executed skillfully.

References

• Bresnahan, T. F., & Reiss, P. C. (1990). Entry and Competition in Concentrated Markets. The Journal of Political Economy, 98(5, Part 1), 977-1009.
• Cournot, A. A. (1838). Recherches sur les principes mathématiques de la théorie des richesses. Paris: Librairie Philosophique J. Vrin.
• Fudenberg, D., & Tirole, J. (1991). Game Theory. MIT Press.
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• Weitzman, M. L. (1984). Increasing Returns and the Introduction of New Goods. The Bell Journal of Economics, 15(1), 1-37.