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Two firms i = 1,2 simultaneously choose quantities q_i R. Given a quantity profile (q_1, q_2), the market price is given by P (q_1 +
Two firms i = 1,2 simultaneously choose quantities q_i R. Given a quantity profile (q_1, q_2), the market price is given by P (q_1 + q_2) = 1 (q_1 + q_2). A total cost for producing qi units of products is C(q_i) = c*q_i with 0 c < 1 for both i = 1, 2. Thus, firm i's payoff function is i(q_i,q_j)=P(q_i +q_j)q_i c*q_i =(1q_i q_j c)q_i. Now, suppose that firm 1 first chooses q_1, and after observing q_1, firm 2 chooses q_2. What is a SPE of this game?
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