ECON 1050 Chapter 15: Economics-1 (1) (dragged) 9

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A sequential entry game in a contestable market: In a contestable market a market in which firms can enter and leave so easily that firms in the market face competition from potential entrants firms play a sequential entry game. In the first stage, agile decides whether to set the monopoly price or the competitive price. In the second stage, wannabe decides whether to enter or stay out. Wannabe"s payoffs are in blue and agile"s are in red. The equilibrium is agile sets a competitive price and makes zero economic profit to keep. A less costly strategy is limit pricing, which sets the price at the highest level that is consistent with keeping the potential entrant out. Canada"s first anti-combine law was enacted in 1989. The law today is defined in the competition act of 1986. The 1986 act established a competition bureau and a competition tribunal.

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