Lastly, games played by consumers may also affect the competitive effect of exclusive dealing. Suppose now that there are three identical consumers, E, F, and G. Each consumer purchases at most one unit of product, and enjoys the consumption value ($4).

For the next two questions, suppose that Firm D faces a higher entry cost, 3 < f < 9/2. But the marginal cost of the two firms remains the same as before.

Consider the following exclusive dealing contract. Firm C simultaneously offers the same conditions to all three consumers: The price (p^C) is $4, the sign-up bonus (x) is $0.01, and the penalty (d) is $10. Consumers simultaneously decide whether to accept the contract. Then, Firm D observes the content of the contract and how many consumers have signed, and makes entry decision accordingly. Other aspects of the game remain the same.

6. _ (6%) Describe the best response of consumer E as a function of the acceptance or rejection decision of other two consumers.