Question
Draw the extensive form of the following game, a version of the Cournot duopoly game (analyzed in Chapter 10). Two firms compete in a homogeneous
Draw the extensive form of the following game, a version of the Cournot duopoly game (analyzed in Chapter 10). Two firms compete in a homogeneous good market, where the firms produce exactly the same good. The firms simultaneously and independently select quantities to produce. The quantity selected by firm i is denoted qi and must be greater than or equal to zero, for i = 1, 2. The market price is given by p = 12 q1 q2 . For simplicity, assume that the cost to firm i of producing any quantity is zero. Further, assume that each firm's payoff is defined as its profit. That is, firm i's payoff is (12 qi qj)qi , where j denotes firm i's opponent in the game.
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