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 q3, respectively. Market demand is given by p(Q) = 100 - Q, and Q = q1 + 92 + 93. Firm 1's costs are c1 (91) = 291, firm 2's costs are c2(92) = 192 and firm 3's costs are c3(93) = 193. Starting from the end of the game, you can express Firm 2's best response function in terms of q1 and 93, and you can similarly express Firm 3's best response function in terms of q1 and q2. Using these, answer the following questions. a) If Firm 1 chooses q1 = 9, what quantity will Firm 2 choose? b) If Firm 1 chooses q1 = 100, what quantity will Firm 2 choose? c) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) 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 with AI-Powered 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

Mechanics of Materials

Authors: James M. Gere, Barry J. Goodno

7th edition

495438073, 978-0495438076

Students also viewed these Economics questions

Question

Assignment 1 - Quality Functions Deployment ( individual )

Answered: 1 week ago

Question

Please make it fast 4 5 1 .

Answered: 1 week ago