INDUSTRIAL ORGANIZATION QUESTION

I posted pictures of a question I have and am having problems with

I need this answered tonight

3:22 MW... 61% + Expert Q&A + 1. Firm 1 is the incumbent in a market lasting two periods. In the first period, they are a monopolist who can make an investment in R&D which will lower their costs in the second period. In the second period, the potential entrant can enter the market or stay out. Inverse demand curve p = 74 -90. Its first- period costs are C(q) = 15 + 20q (so marginal cost is 20) and it faces entry in the second period by Firm 2, which has identical costs. There is an asymmetry between the firms, however, in that only Firm 1 has the option of investing $63.5 in R&D in the first period in order to reduce its second-period marginal costs to $2 per unit. By working through this problem, you will show that it is optimal for Firm 1 to make this investment even though Firm 2 enters regardless. The extensive form of the game looks like this, with payoffs as (Monopolist, Entrant): ser (A,B) Entera Do Not Enter Invest (CD) Do Not Tnvest Enter (E,F) 3:22 MW... El 61% + Expert Q&A + ter (A,B) Enter Do Not Enter Invest (CD) Do Not Tnvest Enter (E,F) Do Not ( GH) Enter Now we'll work on the payoffs. First, consider this. At the second period, when the entrant is making a choice, the firms are considering period 2 profits only. Think of the monopolist's first period profits as a "sunk cost". a. You know what D and Hare without any calculations. Replace them. b. To get C, solve for the monopoly profits when the marginal cost is reduced. (Note: Don't forget to subtract the fixed cost!) c. To get G, solve for the monopoly profits when marginal cost is at its original level. Does your answer to c make sense relative to your answer to b? c. To get A & B, solve for the Cournot outcome with different marginal costs. Does the difference in profits from the monopolist to the entrant make sense? 0 3:22 MW... El 61% + Expert Q&A + calculations. Replace them. b. To get C, solve for the monopoly profits when the marginal cost is reduced. (Note: Don't forget to subtract the fixed cost!) c. To get G, solve for the monopoly profits when marginal cost is at its original level. Does your answer to c make sense relative to your answer to b? c. To get A & B, solve for the Cournot outcome with different marginal costs. Does the difference in profits from the monopolist to the entrant make sense? d. To get E & F, solve for the Cournot outcome with the same marginal costs. e. Now solve the game. Do you show that "it is optimal for Firm 1 to make this investment even though Firm 2 enters regardless"? If so, move along to the next part. If not... try to find your mistake rethinking about your answers to the "does this make sense" portions. Show me your work, even if you think something isn't right. Now for the second part: Show that it would not be optimal for Firm 1 to make the investment if there were no threat of entry. f. This is a simpler game right? You must now find the monopolist's first period profits if they invest and if they do not invest. What are second period profits in each case (you have already solved for them!)? Based on the combined (two period) profits, can you agree with the statement above? Draw out the game, with the payoffs for the monopolist in completing your answer. 3:22 MW... 61% + Expert Q&A + 1. Firm 1 is the incumbent in a market lasting two periods. In the first period, they are a monopolist who can make an investment in R&D which will lower their costs in the second period. In the second period, the potential entrant can enter the market or stay out. Inverse demand curve p = 74 -90. Its first- period costs are C(q) = 15 + 20q (so marginal cost is 20) and it faces entry in the second period by Firm 2, which has identical costs. There is an asymmetry between the firms, however, in that only Firm 1 has the option of investing $63.5 in R&D in the first period in order to reduce its second-period marginal costs to $2 per unit. By working through this problem, you will show that it is optimal for Firm 1 to make this investment even though Firm 2 enters regardless. The extensive form of the game looks like this, with payoffs as (Monopolist, Entrant): ser (A,B) Entera Do Not Enter Invest (CD) Do Not Tnvest Enter (E,F) 3:22 MW... El 61% + Expert Q&A + ter (A,B) Enter Do Not Enter Invest (CD) Do Not Tnvest Enter (E,F) Do Not ( GH) Enter Now we'll work on the payoffs. First, consider this. At the second period, when the entrant is making a choice, the firms are considering period 2 profits only. Think of the monopolist's first period profits as a "sunk cost". a. You know what D and Hare without any calculations. Replace them. b. To get C, solve for the monopoly profits when the marginal cost is reduced. (Note: Don't forget to subtract the fixed cost!) c. To get G, solve for the monopoly profits when marginal cost is at its original level. Does your answer to c make sense relative to your answer to b? c. To get A & B, solve for the Cournot outcome with different marginal costs. Does the difference in profits from the monopolist to the entrant make sense? 0 3:22 MW... El 61% + Expert Q&A + calculations. Replace them. b. To get C, solve for the monopoly profits when the marginal cost is reduced. (Note: Don't forget to subtract the fixed cost!) c. To get G, solve for the monopoly profits when marginal cost is at its original level. Does your answer to c make sense relative to your answer to b? c. To get A & B, solve for the Cournot outcome with different marginal costs. Does the difference in profits from the monopolist to the entrant make sense? d. To get E & F, solve for the Cournot outcome with the same marginal costs. e. Now solve the game. Do you show that "it is optimal for Firm 1 to make this investment even though Firm 2 enters regardless"? If so, move along to the next part. If not... try to find your mistake rethinking about your answers to the "does this make sense" portions. Show me your work, even if you think something isn't right. Now for the second part: Show that it would not be optimal for Firm 1 to make the investment if there were no threat of entry. f. This is a simpler game right? You must now find the monopolist's first period profits if they invest and if they do not invest. What are second period profits in each case (you have already solved for them!)? Based on the combined (two period) profits, can you agree with the statement above? Draw out the game, with the payoffs for the monopolist in completing your