There are two firms. Firm 1 is theincumbent, which is currently producing the monopoly output level. Firm 2 is a potential entrant. Firm 1 would like to deterentry; however, it cannot commit to the monopoly output after entry. In otherwords, if Firm 2enters, they each will produce the Cournot duopoly output and will earn the Cournot duopoly profit.

Thesequantity-setting firms face the inverse market demand ofp=220Q,

where Q=q1+q2.

Each firm has a marginal cost of $55 per unit. Assume there are no fixed costs.

Suppose the incumbent can pay a fee to the government for exclusive rights to the market. What is the largest fee the incumbent would be willing to pay to prevententry?

Assume it would pay a fee that would make it indifferent between preventing and accommodating entry.

The monopolist would pay a fee of up to $.................to deter entry. (Enter your response rounded to two decimalplaces.)

Notes: please solve and show all the steps. Do not copy from other solutions. Thank you.