Three firms sell identical products in a market with inverse demand given by P(Q) = 590 - 4Q, where Q = q1 + q2 + q3, i.e., the sum of all quantities produced by all three firms. Each firm has a constant marginal cost of production MC = 18 and no fixed cost. Firm 1 chooses q1 first. Firms 2 and 3 simultaneously choose q2 and q3 after observing q1. Calculate the subgame perfect equilibrium profit of firm 2.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Three firms sell identical products in a market with inverse demand given by P(Q) = 590 - 4Q, where Q = q1 + q2 + q3, i.e., the sum of all quantities produced by all three firms. Each firm has a constant marginal cost of production MC = 18 and no fixed cost. Firm 1 chooses q1 first. Firms 2 and 3 simultaneously choose q2 and q3 after observing q1. Calculate the subgame perfect equilibrium profit of firm 2.

 

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