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Consider a duopoly with the following demand function: P=15-Q, where Q=Q_1 +Q_(2 ). Each firm has a constant marginal cost of 3 dollars per unit.
Consider a duopoly with the following demand function: P=15-Q, where Q=Q_1 +Q_(2 ). Each firm has a constant marginal cost of 3 dollars per unit. Suppose that firm 1 has a first mover advantage due to superior access to finance. How much should it produce to convince firm 2 to drop out of the market? Is that the optimal policy for firm 1? Explain your answer precisely.
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