Exercise 14.25. (1) Prove Proposition 14.6 for the case in which z (, t | q) could

Exercise 14.25. (1) Prove Proposition 14.6 for the case in which z (ν, t | q) could differ across incumbents with different levels of q. Show that the same BGP as in Proposition 14.6 applies and is essentially unique, in the sense that average incumbent R&D effort is always equal to z∗.

2) Show that the BGP characterized in Proposition 14.6 also applies when the distribution of R&D efforts across incumbents is given by (14.71).