game tree

[winw]

Hi, I have a question about making a game tree.

Firm 2 is considering entering an industry. If firm 2 does not enter the market, they will make no profits while an existing firm (firm 1) will make $300 profit. If firm 2 decides to enter the industry, then firm 1 can choose to fight or not to fight. If firm one chooses to fight then both firms will make 50 in profit. If firm one does not fight, then both firms will make 75 in profit. Draw a game tree.


................................. ( 75, 75)
...............................
............Don't fight...
...........................
.........................

................Firm 1
.........................
.enter....................
..................Fight.....
................................ (50,50)
firm 2
..........
.............
...............
Don't enter .
...................
.....................(300,0)

is this right? would enter and don't fight be the solution?

 

[tkhunny]

For Firm #2, "Enter" (>0) completely dominates "Don't Enter" (=0).

Without regard to the firm, "Don't Fight" (75,75) completely dominates "Fight" (50,50).

 

[winw]

Thanks!