Suppose N > 0 firms make a simultaneous and one-time entry decision whether to enter a new market. Entry requires expending a sunk cost E 0, and entering firms produce homogeneous products. If only one firm enters, then it is a monopolist that earns profit M > 0, not counting the entry cost. If more than one firm enters, then severe price competition leads each entering firm to earn 0 profit, not counting the entry cost. Assume that E < M , so that entry can possibly be profitable. Specify a firms probability of entry in a Nash equilibrium of the game in which all firms enter with the same probability.

1. Suppose N > 0 firms make a simultaneous and one-time entry decision whether to enter a new
market. Entry requires
expending a sunk cost E 0, and entering firms produce homogeneous products. If only one firm
enters, then it is a
monopolist that earns profit M > 0, not counting the entry cost. If more than one firm enters, then
severe price
competition leads each entering firm to earn 0 profit, not counting the entry cost. Assume that E <
M
, so that entry can possibly be profitable.
Specify a firms probability of entry in a Nash equilibrium of the game in which all firms enter with
the
same probability