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Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity ql . Firms 2 and 3 observe Firm 1's choice, and then
Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity ql . Firms 2 and 3 observe Firm 1's choice, and then proceed to simultaneously choose qz and q3, respectively. Market demand is given by p(Q) : 100 Q, and Q : ql + q; + (13. Firm 1's costs are c1(q1) : 6q1 , rm 2's costs are c2(q2) : 6g; and firm 3's costs are :33 (43) = 643. Starting from the end of the game, you can express Firm 2's best response function in terms of q] and (13, and you can similarly express Firm 3's best response function in terms of an and [12' Using these, answer the following questions a) (0.5 point) If Firm 1 chooses q1 = 9, what quantity will Firm 2 choose? b) (0.5 point) If Firm 1 chooses q] 100, what quantity will Firm 2 choose? c) (1 point) In the subgame perfect Nash equilibrium of this game, fIrm1 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
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