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Q4 Cournot Duopoly II There are three firms competing in the market for the same good by simultaneously and inde- pendently selecting their supply quantities
Q4 Cournot Duopoly II There are three firms competing in the market for the same good by simultaneously and inde- pendently selecting their supply quantities q1 2 0, q2 2 0 and q3 2 0. The market price is given by P(Q) = 1 - Q where Q = q1 + 92 + 93. All firms have the same constant marginal cost c > 0 for producing the good. Firms are maximizing their profits. To sum up, the payoffs are given by: 71 (91, 92, 93) = P(Q) q1 - cq1 = [4 - (q1 + 92 + 93)191 - cq1 712(91, 92, 93) = P(Q) 92 - cq2 = [4 - (q1 + 92 + 93)192 - 092 73(91, 92, 93) = P(Q) 93 - cq3 = [4 - (q1 + 92 + 93)193 - cq3 Assume that 1 = 15 and c = 3 when answering the following questions. (a) Find best response functions for all firms. (b) Find the Nash equilibrium. (c) Calculate market price and firms' profits at the equilibrium. (d) Compare results in part(c) with results of part(c) in Q3. Comment
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