Consider the pricing game below:
If Gooi can move first, and Ici threatens to buy yogurt machines, no matter what Gooi does, what is the Nash equilibrium in the dynamic game?
Hint: Draw the complete game tree and write down the strategy set for each player. (Remember that especially for the second-mover, a strategy is a complete contingent plan. Find the Nash equilibrium in the dynamic game by backward induction.
A. Gooi will threaten to buy yogurt machines, no matter what Ici does, to see whether that will get the people at Ici to change their minds.
B. Gooi will buy yogurt machines, which it otherwise wouldn't have, in order to retaliate.
C. the equilibrium payoff of ($50,$50) will be enforced.
D. Gooi will not change its behavior, because Ici's threat is not credible.