Q5 Consider the following statements about the Stackelberggame from the slides, assuming both firms are identical:• (1) Denote by q© the Cournot equilibrium quantityproduced by each firm, and by qºCquantity defined by P(qPC) = c (price equals marginal cost).Let s2 denote a strategy where fırm 2 plays q2 = q° if itobserves q 1 = q°, and plays q2 = qPC otherwise. Let s 1the competitive%3Ddenote a strategy where firm 1 plays q1 = q°. Then, (s1,52)is a Nash equilibrium of the Stackelberg game, but it's nota subgame perfect Nash equilibrium.• (II) The first firm is allowed to change its quantity afterobserving firm 2's quantity chosen at the second stage.• (III) Consumers are worse off in the Stackelberg gamecompared with the Cournot outcome given the sameparameters.Only Il is correctAll options are incorrect.O More than one option is correct.O Only IIl is correctO Only I is correct.

Consider the following statements about the Stackelberg game from the slides, assuming both firms are identical: • (1) Denote by qº the Cournot equilibrium quantity produced by each firm, and by q°C the competitive quantity defined by P(qPC) = c (price equals marginal cost). Let s2 denote a strategy where firm 2 plays q2 = q° if it %3D %3D observes g 1 = gC, and plays gɔ = a 1 = gC. and plays gɔ = gPC otherwise, Let s 1

Consider the following statements about the Stackelberg game from the slides, assuming both firms are identical: • (1) Denote by qº the Cournot equilibrium quantity produced by each firm, and by q°C the competitive quantity defined by P(qPC) = c (price equals marginal cost). Let s2 denote a strategy where firm 2 plays q2 = q° if it %3D %3D observes g 1 = gC, and plays gɔ = a 1 = gC. and plays gɔ = gPC otherwise, Let s 1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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