2. Frankie and Johnny own competing motorcycle shops. They face a demand curve P = 200 - 3Q, where Q is the total number of motorcycles produced by both Frankie and Johnny. Each shop faces a marginal cost of production of 20.

A) If Frankie and Johnny must decide their production levels at the same time, what is the Nash equilibrium level of production for each shop? B) Suppose Frankie gets to make his production decision first. What is the sub-game perfect Nash equilibrium level of production for each firm?

C) Do their customers prefer them to make simultaneous or sequential decisions? Why? D) How much would Johnny be willing to pay to keep Frankie from making his decision first?

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