Now consider the following variant of a Cournot duopoly.

2. Now consider the following variant of a Cournot duopoly. Suppose that firm 1 already exists in the industry and firm 2 is considering whether to enter. If firm 2 stays out, then firm 1 observes this and is a monopolist, choosing their level of production, q1 accordingly. If firm 2 decides to enter (or go "in"), then it pays a cost f and firm 1 again observes this choice. The two firms then choose their levels of production as Cournot duopolists, q1 and q2. Suppose that the inverse demand function and the cost of production functions are as in class. That is, let Ci (qi) = cqi and let a - 91 - 92 if q1 + 92 a (a) What are the action sets for each firm in this game? (b) What are the strategy sets for each firm? (c) Give the extensive form of this game