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Stackelberg with more than 2 firms: Suppose there are N firms in a homogeneous good market which set their output sequentially (firm i in position
Stackelberg with more than 2 firms: Suppose there are N firms in a homogeneous good market which set their output sequentially (firm i in position i). Suppose that firms have identical constant marginal cost of production c. The industry faces an inverse demand P(q) = a q where q = N i=1 qi is aggregate demand. Suppose a > c.
a. What is the output level of firm i in the subgame perfect equilibrium?
b. What is the aggregate output for N firms? c. Describe the equilibrium outcome when the number of firms increses without bounds (N ).
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