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4. * Two firms produce quantities 91 and 92 of an homogeneous good. Both firms get utility as a function of the aggregate quantity of
4. * Two firms produce quantities 91 and 92 of an homogeneous good. Both firms get utility as a function of the aggregate quantity of the good G = 91 +92; the two firms get respectively {G1/2 and G1/2. For instance, the two firms might be contributing to developing a cleaner production technology; as a result, both firms benefit from the fact that their customers have a better opinion of their products, although firm 2 benefits more than firm 1. The marginal cost of every unit of production is equal to 1 for both firms. , how much will firm a. If firm 2 produces 92, how much will firm 1 produce? If 92 1 produce? b. If firm 1 produces 91, how much will firm 2 produce? If 91 = , how much will firm 2 produce? c. If both firms choose their production simultaneously, how much (R&D) will they produce in equilibrium? d. Consider the case in which firm 1 chooses first how much R&D to produce, and firm 2 follows. How much will they produce in equilibrium? e. Repeat question d), but now assume that firm 2 chooses first. f. Is G greater when the firm that benefits more from the technology is allowed to choose first? Explain the intuition behind your
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