Before entry, an incumbent earns a monopoly profit of Pm = 10 million. If entry occurs, the incumbent and an entrant each earn the duopoly profits Pd = 3 million.

Suppose the incumbent can induce the government to require all firms to install pollution-control devices that cost each firm 4 million.

What is the sub game Nash Equilibrium of this game?

  {Incumbent: convince the government to install; Entrant: do not enter}

  {Incumbent: convince the government not to install; Entrant: do not enter}

  {Incumbent: convince the government to install; Entrant: enter}