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1. Consider a market with 3 firms competing in quantities. Demand is linear, charac- terized by P(Q) = 1-Q All firms have the same cost
1. Consider a market with 3 firms competing in quantities. Demand is linear, charac- terized by P(Q) = 1-Q All firms have the same cost function c(q) = cq. Moreover, we assume c = 0 for all firms. We will analyze the outcomes of the game under different market configurations. For each of them, compute the Subgame perfect equilibrium of the associated game (you don't need to recalculate the equilibriums for part (a) and (b)) a. First consider the problem in which all firms decide how many units to produce simultaneously (Cournot equilibrium) b. Suppose now that firms decide how many units to produce sequentially: first firm 1 decides how many units to produce, then firm 2 (knowing how many units firm 1 has produced) and finally firm 3 (knowing the production of firms 1 and 2). c. For this part, suppose that first firms 1 and 2 decide simultaneously how many units to produce, and then firm 3 decides how much to produce knowing how many units they have produced. d. Now, suppose that first Firm 1 decides how many units to produce and then firms 2 and 3 decide simultaneously how many units to produce (knowing the production of firm 1) e. Finally, compare the units sold by each firm and the equilibrium price under the four different market configurations. How would Firm 3 rank the different market configurations
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