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This exercise is a continuation of exercise 7 of Course Week 2. Now the game is played sequentially. Two duopolists produce similar but slightly differentiated
This exercise is a continuation of exercise 7" of Course Week 2. Now the game is played sequentially. Two duopolists produce similar but slightly differentiated products. They face similar demand curves: 01 = 40 P1\"(1r'2)P2 Q: = 40 P2 -' (U2)P| Also: AC. = MC1= AC2 = MCg = 20. Both duopolists compete on price. a) Suppose rm 1 is able to invest to move second, but rm 2 is not. What is the maximum amount of money rm 1 is willing to invest to move second? If rm 1 is able to move second, what will be the market shares of rm 1 and rm 2, respectively? b) Suppose the two rms collude and agree to share prots equally. What prot will each rm make
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