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Managerial Economics Questions

Name

Institution

Course

Professor

Date
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Managerial Economics Questions

Can, and how does, the entrant succeed?

In the sequential-move game, each player chooses their move before learning what their

opponent will do. The next step is for the opponent to decide based on the outcome of the

previous player action. We must think ahead and backwards to discover the equilibrium (Froeb

et al, 2018). While thinking forward and backward, it can be deduced that if the competitor stays

in the race, both they and the incumbent would be on five. The newcomer would lose a point and

the incumbent firm would gain points if the entrant elected to leave the incumbent firm. In the

end, if the entrant withdrew from the incumbent, they would lose less, and the incumbent would

gain more than if the entrant had been accommodated. Example of a move game is Chess.

Is the incumbent ever in control of this game?

No, since if the entrant moves first, he may be providing the incumbent with false

information that may cause the incumbent to act in a path that best suits the entrant's short- and

long-term aims. However, if the incumbent knew that the participant might have misrepresented

their position, he would act appropriately, which might give him the advantage and put him in

charge of the game.

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References

Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2018). Managerial Economics: A

Problem Solving Approach (5th ed.). Boston, MA: Cengage Learning.