Suppose two firms engage in simultaneous quantity competition. Both firms have 0 marginal cost. Firm A : P(Q)= 24-Q Firm B: P(Q)= 24-2Q a) Find the Nash Equilibrium quantities q^NE and profits.
Suppose two firms engage in simultaneous quantity competition. Both firms have 0 marginal cost. Firm A : P(Q)= 24-Q Firm B: P(Q)= 24-2Q a) Find the Nash Equilibrium quantities q^NE and profits.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Suppose two firms engage in simultaneous quantity competition. Both firms have 0
marginal cost.
Firm A : P(Q)= 24-Q
Firm B: P(Q)= 24-2Q
a) Find the Nash
(b) Find the
(c) Now suppose the game is repeated infinitely and each firm has a common discount
factor δ. Find the required discount factor to sustain the following grim trigger
strategy as a SPNE: Play Q^M /2 if this has been played in every previous period,
otherwise play q^NE.
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