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You are considering entering a market serviced by a monopolist in Indonesian telecommunication industry. You currently...

You are considering entering a market serviced by a monopolist in Indonesian telecommunication industry. You currently earn $0 economic profits, while the monopolist earns $5. If you enter the market and the monopolist engages in a price war, you will lose $5 and the monopolist will earn $1. If the monopolist doesn't engage in a price war, you will each earn profits of $2.

  1. Write out the extensive form of the above game.
  2. There are two Nash equilibria for the game. What are they?
  3. Is there a subgame perfect equilibrium? Explain.
  4. If you were the potential entrant, would you enter? Explain why or why not.
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