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Question 2: Three oligopolists operate in a market with inverse demand given by p = a - (q1 + 92 + 93). The total cost
Question 2: Three oligopolists operate in a market with inverse demand given by p = a - (q1 + 92 + 93). The total cost for each firm is given by C(q() = cq, where i=1,2,3, respectively for Firm 1, Firm 2 and Firm 3. The firms choose their quantities as follows: Firm 1 first chooses q, and then Firms 2 and 3 observe q, and choose simultaneously q2 and 93 respectively. Given any q1, first solve the Cournot equilibrium of the second stage of the game between Firms 2 and 3 and then use the backward induction to find the Subgame Perfect equilibrium outcome of the whole game. (25 marks)
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