Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please refer to the image for the question Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity q1 . Firms 2

please refer to the image for the question

image text in transcribed
Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity q1 . Firms 2 and 3 observe Firm 1's choice, and then proceed to simultaneously choose 92 and 93 , respectively. Market demand is given by p(Q) = 100 - Q, and Q = q1 + q2 + 93 . Firm 1's costs are c1(q1) = 4q1, firm 2's costs are c2(92) = 2q2 and firm 3's costs are C3(93) = 293. Starting from the end of the game, you can express Firm 2's best response function in terms of q1 and 93 , and you can similarly express Firm 3's best response function in terms of q1 and q2 . Using these, answer the following questions. a) (0.5 point) If Firm 1 chooses q1 = 3, what quantity will Firm 2 choose? b) (0.5 point) If Firm 1 chooses q1 = 100, what quantity will Firm 2 choose? c) (1 point) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) (0.5 point) In the subgame perfect Nash equilibrium of this game, firm 2 and firm 3 each produce what quantity

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial economics

Authors: william f. samuelson stephen g. marks

7th edition

9781118214183, 1118041585, 1118214188, 978-1118041581

More Books

Students also viewed these Economics questions

Question

How did Searss tire advertising break the law?

Answered: 1 week ago