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Three firms, 1, 2, and 3, produce quantities q 1 , q 2 and q 3 of the same good with market demand P =

Three firms, 1, 2, and 3, produce quantities q1, q2 and q3 of the same good with market demand P = 100 2Q, where Q = q1 + q2 + q3 is the total market supply. The total costs of each firm are expressed as

C (qi) = 10qi + 0.5qi2

If the firms are in Cournot competition:

(a) Find the Nash equilibrium quantities of the game.

(b) Find the outcome which maximises the sum of the three firms' profits subject to q1 = q2 = q3. Why can this not be sustained in Nash equilibrium?

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