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March 28, 2017

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According to the following game tree, and if the entrant and incumbent both only care about their own monetary payoff, what is/are the game's Nash equilibrium?

Entrant - stays out (2,15)
- enters
If the entrant enters,
Incumbent - co operates (5,5)
- punishes (-3,9)

So what is the games nash equilibrium/equilibria, and what is the game's subgame perfect nash equilibrium/equlibria?

(I wasn't sure what was the difference too)

Thank you!

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