Two firms simultaneously decide whether or not to enter a market, and if yes, when to enter a market. The market lasts for 3 periods: starting in period 1 and ending in period 3. A firm that chooses to enter can enter in any of the three periods. Once a firm enters the market in any period it has to stay in the market through period 3. In any period t that the the firm is not in the market, it earns a zero profit. In any period t, if a firm is a monopolist in the market, it makes the profit 10t-24. In any period t if a firm is a duopolist in the market it makes a profit of 71-24. A firm's payoff in the game is the total profit it earns in all the periods it is in the market, or zero if it never enters the market. Is there a Nash equilibrium in which both firms enter the market?

Two firms simultaneously decide whether or not to enter a market, and if yes, when to enter a market. The market lasts for 3 periods: starting in period 1 and ending in period 3. A firm that chooses to enter can enter in any of the three periods. Once a firm enters the market in any period it has to stay in the market through period 3. In any period t that the the firm is not in the market, it earns a zero profit. In any period t, if a firm is a monopolist in the market, it makes the profit 10t-24. In any period t if a firm is a duopolist in the market it makes a profit of 71-24. A firm's payoff in the game is the total profit it earns in all the periods it is in the market, or zero if it never enters the market. Is there a Nash equilibrium in which both firms enter the market?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.12P

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