Question
Suppose two firms compete in a market given by the demand curve P=325-Q, where Q=q1+q2, and the cost function MC=AC=75 is the same for all
Suppose two firms compete in a market given by the demand curve P=325-Q, where Q=q1+q2, and the cost function MC=AC=75 is the same for all players. a) If these firms compete on quantity, and player 1 and player 2 move simultaneously, what will be the quantities set by each firm and the market clearing price? b) If these firms compete on quantity, where player 1 moves first, then player 2 moves, what will be the quantities set by each firm and the market clearing price? c) Suppose a third player joins, such that Q=q1+q2+q3. Given the demand and cost curves above, if these firms compete on quantity, where player 1 moves first, then player 2 moves, then player 3 moves, what will be the quantities set by each firm and the market clearing price? d) What is the maximum amount player 2 would be willing to pay to move at the same time as player 1, if anything, with player 3 then moving afterwards?
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