Y7

4. (20') A manufacturer of automobile tires produces at a cost of $1D per tire. It sells units to a retailer who in turn sells the tires to consumers. Imagine that the retailer Faces the inverse demand curve p = 210 q. The retailer has no cost of production, other than whatever it must pay to the manufacturer for the tires. Suppose that the manufacturer and retailer interact as follows. First. the manufacturer sets a price w that the retailer must pay for each tire. Then, the retailer decides how many tires q to purchase from the manufacturer and sell to consumers. A. (4) If\" denotes the prot of the manufacturer. HR denotes the prot of the retailer. Write TIM and EH as a function of w and q. B. (8) Calculate the subgame perfect equilibrium of this game. C. (8) Calculate W, mpm and ER that are obtained from the SPE you have found in part (B)