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Is there a Nash equilibrium in which both firms enter the market? 1) No. There is no Nash equilibrium in which both firms enter the market. 2) Yes. There is a Nash equilibrium in which both firms enter the market.

Is there a Nash equilibrium in which both firms enter the market? 1) No. There is no Nash equilibrium in which both firms enter the market. 2) Yes. There is a Nash equilibrium in which both firms enter the market.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 7t-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? 1) No. There is no Nash equilibrium in which both firms enter the market. 2) Yes. There is a Nash equilibrium in which both firms enter the market.
Transcribed Image Text: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 7t-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? 1) No. There is no Nash equilibrium in which both firms enter the market. 2) Yes. There is a Nash equilibrium in which both firms enter the market.
Two finns 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 7t-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. Firm 1's best response to Firm 2's choice Do not enter is to enter in period: Numerical answer
Transcribed Image Text:Two finns 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 7t-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. Firm 1's best response to Firm 2's choice Do not enter is to enter in period: Numerical answer
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