Martin J. Osborne; Ariel Rubinstein

Published On


Page Range

pp. 257–294


  • English

Print Length

37 pages

Extensive games

A market is currently served by a single incumbent. A competitor is considering entering the market. The incumbent wants to remain alone in the market and thus wishes to deter the competitor from entering. If the competitor enters, the incumbent can start a price war or can act cooperatively. A price war is the worst outcome for both parties; cooperative behavior by the incumbent is best for the competitor, and for the incumbent is better than a price war but worse than the competitor’s staying out of the market. We can model this situation as a strategic game.


Martin J. Osborne

Professor Emeritus of Economics at University of Toronto

Ariel Rubinstein

Emeritus in School of Economics at Tel Aviv University
Professor of Economics at New York University