Refer to the normal-form game of price competition shown below. Firm B is the incumbent facing potential entry from its rival, firm A. Firm A's strategies consist of {entry, stay out}. Firm B's strategies are then {hard if entry; hard if stay out; soft if entry; soft if stay out}. Find the non-subgame Nash equilibrium to this game, if one exists.
A) Firm A plays {stay out}; firm B plays {hard if entry}.
B) Firm A plays {entry}; firm B plays {hard if entry}.
C) Firm A plays {entry}; firm B plays {soft if entry}.
D) There is no non-subgame Nash equilibrium to this game.

Question

Refer to the normal-form game of price competition shown below.  Firm B is the incumbent facing potential entry from its rival, firm A. Firm A's strategies consist of {entry, stay out}. Firm B's strategies are then {hard if entry; hard if stay out; soft if entry; soft if stay out}. Find the non-subgame Nash equilibrium to this game, if one exists.
A) Firm A plays {stay out}; firm B plays {hard if entry}. 
B) Firm A plays {entry}; firm B plays {hard if entry}. 
C) Firm A plays {entry}; firm B plays {soft if entry}. 
D) There is no non-subgame Nash equilibrium to this game.

Quizplus · Accepted Answer

The Answer of Refer to the normal-form game of price competition shown below.  Firm B is the incumbent facing potential entry from its rival, firm A. Firm A's strategies consist of {entry, stay out}. Firm B's strategies are then {hard if entry; hard if stay out; soft if entry; soft if stay out}. Find the non-subgame Nash equilibrium to this game, if one exists.
A) Firm A plays {stay out}; firm B plays {hard if entry}. 
B) Firm A plays {entry}; firm B plays {hard if entry}. 
C) Firm A plays {entry}; firm B plays {soft if entry}. 
D) There is no non-subgame Nash equilibrium to this game.

Refer to the Normal-Form Game of Price Competition Shown Below