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In a town square, two identical shops A and B compete by choosing the quantities of fruit tarts to produce. Each shop has a constant

In a town square, two identical shops A and B compete by choosing the quantities of fruit tarts to produce. Each shop has a constant marginal and average cost of 3, and they face the following market demand for fruit tarts: Q = qA + qB = 17 p (1) (a.) Assume the shops compete in a Cournot fashion (they choose quantities simultaneously). What is the best response of each shop? What is the Nash Equilibrium? Show your work. (b.) Now assume that the shops compete in a Stackelberg fashion, where shop A is the leader and chooses its quantity first, and shop B is the follower, choosing its quantity after observing qA. What is the Subgame Perfect Nash Equilibrium of this game? Show your work. Hint: think about what the different subgames are here

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