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Hi I have attached the question as a picture. This is Game Theory and I am having a hard time with it. 1. Consider a

Hi I have attached the question as a picture. This is Game Theory and I am having a hard time with it.

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1. Consider a two-rm industry. Firm 1 (the incumbent} chooses a level of output q1. Firm 2 (the potential entrant) observes q: and then chooses its level of output qz. The demand for the product is P = 10!] - Q, where Q is the total output sold by the two rms which equals q1 +q2. Assume that the marginalcostofeach rmis zero. a} Find the subgame perfect equilibrium levels of ql and q: keeping in mind that rm 1 chooses q. rst and rm 2 observes q. and chooses its qg. Find the prots of the two rms-s1 and 11:1- in the subgame perfect equilibrium. How do these numbers differ from the Cournot equilibrium? b} For what level ofq: would rm 2 be deterred 'om entering? Would a rational rm 1 have an incentive to choose this level of q:? Which entry condition does this market have: Blockaded, Deterred, or accommodated?l Now suppose that rm 2 has to incur a xed cost of entry, F :5 d. c} For what values of F will entry be blockaded'? d} Find out the entry,r deterring level of q1, denoted by q:", as a function of F. Next, derive the expression for rm 1's prot, when entry is deterred, as a 1nctiorn of F. For what values of F would rm 1 use an entry deterring strategy

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