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
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.3P
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Q5
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Step 1
Cournot Model Outcomes -
Output of each firm = qc
Strategy (s1 , s2 ) => If , q1 = qc , then q2 = qc
If , q1 /= qc , then q2 = qpc
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