Question: 1 . Maintaining monopoly power: entry deterrence vs buyout Consider the market for a homogeneous good with demand given by P ( Q ) =

1. Maintaining monopoly power: entry deterrence vs buyout Consider the market for a homogeneous good with demand given by P(Q)=344Q. Let there be a single incumbent firm (I) in the market and a single potential entrant (E). Each firm i = I or E has access to the same technology characterised by cost function Ci(qi)=2qi + F, with 2< F <16(the constraint 2< F ensures that entry deterrence is preferred to accommodation and F <16 ensures that both firms can reap positive profits under Stackelberg competition). Find the stackelberg equilibrium and then show steps to find the the minimum quantity that the incumbent needs to produce to keep the entrant out of the market (the limit quantity)?

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