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4. Suppose two firms compete by bringing a homogenous product to the market sequentially. The market demand is y = 16 - p and both

4. Suppose two firms compete by bringing a homogenous product to the market sequentially. The market demand is y = 16 - p and both firms have zero cost. Firm one first selects output, y1, which is observed by firm two. Then firm two selects output, y2; and both firms collect payoffs (profits).

(a) How many subgames are there?

(b) Find the unique pure strategy SPNE.

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