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 = 9i + 92 + 93. Firm 1's costs are c (91) = 191, firm 2's costs are c2(92) = 49, and firm 3's costs are c3(q3) = 4q3. Starting from the end of the game, you can express Firm 2's best response function in terms of q and q3, and you can similarly express Firm 3's best response function in terms of q, and q2. Using these, answer the following questions. a) (0.5 point) If Firm 1 chooses q1 = 12, what quantity will Firm 2 choose? b) (0.5 point) If Firm 1 chooses q1 = 100, what quantity will Firm 2 choose? c) (1 point) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) (0.5 point) 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 = 9i + 92 + 93. Firm 1's costs are c (91) = 191, firm 2's costs are c2(92) = 49, and firm 3's costs are c3(q3) = 4q3. Starting from the end of the game, you can express Firm 2's best response function in terms of q and q3, and you can similarly express Firm 3's best response function in terms of q, and q2. Using these, answer the following questions. a) (0.5 point) If Firm 1 chooses q1 = 12, what quantity will Firm 2 choose? b) (0.5 point) If Firm 1 chooses q1 = 100, what quantity will Firm 2 choose? c) (1 point) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) (0.5 point) 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
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 1E
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