Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity q1 . Firms 2 and 3 observe Firm 1's choice, and then

image text in transcribed
Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity q1 . Firms 2 and 3 observe Firm 1's choice, and then proceed to simultaneously choose q2 and 93, respectively. Market demand is given by P(Q) = 100 - Q, and Q = q1 + 92 + 93. Firm 1's costs are c1 (q1) = 1q1, firm 2's costs are C2 (92) = 692 and firm 3's costs are C3 (93) = 693. Starting from the end of the game, you can express Firm 2's best response function in terms of q1 and q3, and you can similarly express Firm 3's best response function in terms of q1 and 92 . Using these, answer the following questions. If rounding is needed, write your answers to 3 decimal places. a) (0.5 point) If Firm 1 chooses 91 = 12, what quantity will Firm 2 choose? b) (0.5 point) If Firm 1 chooses 91 = 100, what quantity will Firm 2 choose? c) (1 point) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) (0.5 point) In the subgame perfect Nash equilibrium of this game, firm 2 and firm 3 each produce what quantity

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Research In Forest Economics And Forest Policy

Authors: Marion Clawson

1st Edition

1317362624, 9781317362623

More Books

Students also viewed these Economics questions