Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity q₁. Firms 2 and 3 observe Firm 1's choice, and then proceed to simultaneously choose q2 and q3, respectively. Market demand is given by p(Q) = 100-Q, and Q = 9₁ +92 +93. Firm 1's costs are c₁ (9₁) = 6q₁, firm 2's costs are c₂ (92) = 592 and firm 3's costs are c3(93) = 593- Starting from the end of the game, you can express Firm 2's best response function in terms of q₁ and 93, and you can similarly express Firm 3's best response function in terms of q₁ and 92. Using these, answer the following questions. If rounding is needed, write your answers to 3 decimal places. a) If Firm 1 chooses q₁ = 12. what quantity will Firm 2 choose? b) If Firm 1 chooses q₁ = 100, what quantity will Firm 2 choose? c) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) In the subgame perfect Nash equilibrium of this game, firm 2 and firm 3 each produce what quantity?
Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity q₁. Firms 2 and 3 observe Firm 1's choice, and then proceed to simultaneously choose q2 and q3, respectively. Market demand is given by p(Q) = 100-Q, and Q = 9₁ +92 +93. Firm 1's costs are c₁ (9₁) = 6q₁, firm 2's costs are c₂ (92) = 592 and firm 3's costs are c3(93) = 593- Starting from the end of the game, you can express Firm 2's best response function in terms of q₁ and 93, and you can similarly express Firm 3's best response function in terms of q₁ and 92. Using these, answer the following questions. If rounding is needed, write your answers to 3 decimal places. a) If Firm 1 chooses q₁ = 12. what quantity will Firm 2 choose? b) If Firm 1 chooses q₁ = 100, what quantity will Firm 2 choose? c) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) In the subgame perfect Nash equilibrium of this game, firm 2 and firm 3 each produce what quantity?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter12: Price And Output Determination: Oligopoly
Section: Chapter Questions
Problem 2E
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