The chain store paradox of an incumbent who accommodates a finite stream of potential entrants threatening to enter sequentially numerous markets illustrates
A) backwards induction
B) the unraveling problem
C) subgame perfect equilibrium
D) best reply responses
E) all of the above

Question

Quizplus · Accepted Answer

The chain store paradox involves concepts of backwards induction (as players anticipate future actions), the unraveling problem (as the incumbent decides whether to fight or accommodate entrants in a sequence of decisions), subgame perfect equilibrium (strategies that constitute a Nash equilibrium in every subgame), and best reply responses (actions that best respond to the anticipated actions of others).

The Chain Store Paradox of an Incumbent Who Accommodates a Finite