= - 15 Qand three firms with cost curves F. Consider a market with inverse demand P(Q) C1(91) = 391, C2(92) = 392 and C3(93) = 393 (that is, they have the same marginal costs and no fixed costs). They compete by choosing quantities. Suppose that Firm 1 chooses quantity first and is able to credibly commit to this choice. Then firm 2 choose its quantity after observing firm 1's quantity, and is able to credibly commit to this choice. Then firm 3 chooses its quantity after observing firm 1 and firm 2's quantities. In the SPNE of this game, what is the price faced by consumers? (a) P = 4.5 (b) P=6.5 (c) P = 8.5 (d) P = 10.5 (e) P = 3.5
= - 15 Qand three firms with cost curves F. Consider a market with inverse demand P(Q) C1(91) = 391, C2(92) = 392 and C3(93) = 393 (that is, they have the same marginal costs and no fixed costs). They compete by choosing quantities. Suppose that Firm 1 chooses quantity first and is able to credibly commit to this choice. Then firm 2 choose its quantity after observing firm 1's quantity, and is able to credibly commit to this choice. Then firm 3 chooses its quantity after observing firm 1 and firm 2's quantities. In the SPNE of this game, what is the price faced by consumers? (a) P = 4.5 (b) P=6.5 (c) P = 8.5 (d) P = 10.5 (e) P = 3.5
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:=
-
15 Qand three firms with cost curves
F. Consider a market with inverse demand P(Q)
C1(91) = 391, C2(92) = 392 and C3(93) = 393 (that is, they have the same marginal costs and
no fixed costs). They compete by choosing quantities.
Suppose that Firm 1 chooses quantity first and is able to credibly commit to this choice.
Then firm 2 choose its quantity after observing firm 1's quantity, and is able to credibly
commit to this choice. Then firm 3 chooses its quantity after observing firm 1 and firm 2's
quantities. In the SPNE of this game, what is the price faced by consumers?
(a) P = 4.5
(b) P=6.5
(c) P = 8.5
(d) P = 10.5
(e) P = 3.5
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