Game With Monopoly Investing in Additional Capacity

New Firm Chooses

New Firm Enters

New Firm Does Not Enter

Monopoly gets $3, New firm gets $2

High Price

Low Price

Monopoly Chooses

Monopoly gets $5, New firm gets $0

Monopoly gets $4, New firm gets $0

Monopoly Chooses

Monopoly gets $4, New firm gets –$3

High Price

Low Price

($ millions)

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