Three oligopolies operate in a market with an inverse demand of given by P(Q)=a-Q, where Q=q1+ q2+
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Question:
Three oligopolies operate in a market with an inverse demand of given by P(Q)=a-Q, where Q=q1+ q2+ q3 and qj is the quantity produced by firm j. Each firm has a production cost C(qi)=c*qi, with i={1,2,3}. Firms choose their quantities to produce as follows:
(1) In a first stage, companies 1 and 2 simultaneously choose q1 0 and q2 0, respectively; (2) In a second stage, company 3 observes q1 and q2 and chooses q3. What is the subgame perfect outcome?
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