Question

Suppose Best Buy is the only electronics store in a particular​ market, but RadioShack is thinking about entering the market. Best Buy chooses how much to produce first and then RadioShack chooses whether to enter the industry. The strategies and corresponding profits for Best Buy​ (BB) and RadioShack​ (RS) are depicted in the decision tree to the right. What will the firms​ do?

Answer 1

Answer:

Big buy must sell at large at a smaller price which will give tough time to Radio Shack and this is the threat that RadioShack don't want to bear.

Explanation:

Best Buy will choose large quantity because it helps in satisfying the needs of public at large at a lower price. This will force RadioShack to lower its price which will result in losses and this fear of losses will act as a enterance deterent. Though the profit on this strategy is lower but it will safeguard future revenues as RadioShack will not enter the market or get defeated very quickly.