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Part 4 Suppose the two rms set their prices in accordance with the Bertrand model with zero conjectural variation assumption a) Derive the reaction function of the two rms b) Determine the prices, the output and prots of the two producers Part 5 Suppose barriers to entry are zero, and threatened competition from new entrants forces the two producers to set prices that would apply under perfect competition a) What prices will both producers charge for television sets b) What are the quantities sold at the perfectly competitive equilibrium and how much prot will be made? c) Comment and compare the price quantities and prots under joint prot maximization, the Cournot equilibrium, the Bertrand and the perfectly competitive market equilibrium. Part 6 Firm A is an established producer of smartphones whilst Firm B produces to a different market and is also considering a diversication strategy that involves entry into Firm A's market. Faced with the entry threat from Firm B, Firm A must decide whether to accommodate B's presence by cutting back its own output in the event that Firm B does enter, or plan to ght a price war with Firm B. If Firm B does not enter, Firm A earns a prot of R500 and Firm B a prot of R300. If Firm B enters and Firm A decides to accommodate, Firm A earns R200 and rm B eams R600. If A decides to ght firm B in a price war, both rms earn prot of R100. a) If Firm A and Firm B decides their strategy simultaneously, identify pure strategy Nash equilibrium of this game b) Suppose A can observe Firm B's decision as to whether to enter or not. Before Firm A takes the decision to accommodate or ght. Write down the extensive form representation of the sequential game o) Is there a rst mover advantage or second mover advantage in the sequential game? As in the prescribed book, we use the comma (,1 to separate thousands, and the full stop (.1 as a decimal point. ANSWER THE QUESTIONS AS DIRECTLY AS POSSIBLE AND EXPLAIN YOUR ANSWERS. ALL WORKINGS MUST BE SHOWN OTHERWISE, FULL MARKS WILL NOT BE AWARDED