In the sequential bargaining game shown in Figure 10-4 (page 382), referenced in Chapter 13, why is the union's threat to reject an offer of $1 not credible?
Explanation
In sequential games, the concept of subgame perfect equilibrium is used to rule out equilibria that are based on incredible threats. A threat is not credible if a player would not find it in their best interest to carry it out if that point in the game were actually reached.
Other questions
What is the primary objective of a limit pricing strategy as described in Chapter 13?
According to the 'Limit Pricing May Fail to Deter Entry' section, why is a simple threat to maintain a high post-entry output often not credible?
In the extensive-form game depicted in Figure 13-3, 'The Value of Commitment', what is the incumbent's payoff in the subgame perfect Nash equilibrium?
What is the primary distinction between predatory pricing and limit pricing?
In Demonstration Problem 13-1, what is the present value of Baker Enterprises' earnings if it does NOT engage in limit pricing?
What is vertical foreclosure?
In the simultaneous-move production game shown in Table 13-1, what is the Nash equilibrium outcome?
How does the outcome of the sequential-move game in Figure 13-6 demonstrate a first-mover advantage?
What is the key characteristic of a two-way network that leads to direct network externalities?
In the network game shown in Table 13-2, why are the users experiencing 'consumer lock-in'?
Based on the Headline scenario on page 473 and the payoff data on page 474, what is Barkley's profit if it chooses to target 'Households' and Sharpe chooses to target 'Professionals'?
In Demonstration Problem 13-2, what is the present value of Baker Enterprises' earnings if it DOES engage in predatory pricing?
According to the text, which of these is an example of a firm raising its rival's fixed costs?
What is a 'second-mover advantage'?
In a star network with 10 users, how many potential connection services are there?
What is the defining characteristic of a one-way network?
Which of the following is NOT a necessary condition for limit pricing to be an effective strategy to deter a rational entrant?
What is the 'price-cost squeeze' strategy?
According to the analysis of the network game with penetration pricing in Table 13-3, what is the dominant strategy for each user?
In the 'Answering the Headline' section, what is Roger Planter's plan for Barkley Enterprises?
What are 'learning curve effects' in the context of business strategy?
What is the key difference between a direct network externality and an indirect network externality?
According to Inside Business 13-2, why did U.S. Steel opt against limit pricing in the early 20th century?
Why is price discrimination a useful strategic tool for a firm engaging in predatory pricing?
In Demonstration Problem 13-3, which game has a first-mover advantage?
What is the maximum amount you should be willing to pay to move first in the game where the player announcing the smaller positive integer gets a payoff of $20 and the other gets $2?
According to the dynamic analysis on page 481, under what condition is limit pricing a profitable strategy for an incumbent?
What is the key difference between a one-way network and a two-way network in terms of network effects?
According to Figure 13-5, what is the incumbent's profit if it supports the $90 license fee?
What is consumer lock-in in the context of network industries?
In Demonstration Problem 13-4, what is the total revenue a firm can expect from a network of 100 users, assuming it can get all of them to subscribe?
What is the primary trade-off involved in predatory pricing?
According to the dynamic analysis of limit pricing, when is the strategy most attractive?
In the sequential-move production game shown in Figure 13-6, what is firm B's equilibrium profit?
What is the primary reason that a penetration pricing strategy can help an entrant overcome network externalities?
What type of network is characterized by nodes, a central hub, and two-way connections like C1HC2?
If a firm engages in predatory pricing and prices below its marginal cost, what is the expected outcome for the predator firm in the short run?
In the game shown in Figure 13-9, what are Barkley's profits if it moves first and announces it will target 'Households'?
Which of the following is NOT listed as a crucial thing for a first-mover advantage to be effective?
What type of business strategy is exemplified by a software company making its basic document reader available for free while charging for the software that creates the documents?
According to the 'Dynamic Considerations' formula for limit pricing on page 482, what is the up-front cost of limit pricing?
If a network has 5 users, and one new user joins, how many additional potential connection services are created?
What condition must be met for a firm's reputation for being 'tough' on entrants to effectively deter future entry?
In the entry game in Figure 13-2, if the incumbent limit prices by producing QL, what is the entrant's profit if it decides to enter and produce Q units?
Which business strategy involves a firm distorting a rival's decision-making incentives by increasing the rival's production costs?
What is the primary risk for a predator firm engaging in predatory pricing against a similarly situated rival?
In the Barkley and Sharpe headline game (page 474), if the game were simultaneous, what would be Barkley's profit in the Nash Equilibrium?
What type of business strategy is exemplified by Dell's pioneering of the direct-sales model for computers, as described in Inside Business 13-3?
A two-way network links 20 users. According to the formula on page 495, how many total potential connection services does this network provide?