Three firms share a market. The demand function is P(q1, 42, 93) = 10 – q1 - 2 – 3, where q; is the output of firm i, Player i. The marginal cost per unit for each firm is zero. Suppose firm 1 is a market leader, and that firm 2 is a middle leader, choosing qp after observing q1, but before firm 3 chooses its quantity. Firm 3 is the market follower, choosing q3 last. Find the SPE of this game. How much is produced by firm 1? Numerical answer How much is produced by firms 2 & 3?

Three firms share a market. The demand function is P(q1, 42, 93) = 10 – q1 - 2 – 3, where q; is the output of firm i, Player i. The marginal cost per unit for each firm is zero. Suppose firm 1 is a market leader, and that firm 2 is a middle leader, choosing qp after observing q1, but before firm 3 chooses its quantity. Firm 3 is the market follower, choosing q3 last. Find the SPE of this game. How much is produced by firm 1? Numerical answer How much is produced by firms 2 & 3?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.5P

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