Problem
Consider a two-stage game in which firms first make a strategic choice such as product design, location on a Hotelling line, capacity, advertising, etc., and, second, compete in prices or quantities. Why is subgame-perfect equilibrium a useful equilibrium concept? What sort of ‘‘crazy'' Nash equilibria might be ruled out?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.