Question: A. Create a game tree for a Stackelberg oligopoly game. [9 points] In this game there are two firms: a leader firm and a follower

 A. Create a game tree for a Stackelberg oligopoly game. [9

A. Create a game tree for a Stackelberg oligopoly game. [9 points] In this game there are two firms: a leader firm and a follower firm. The leader firm moves first, choosing to produce either 9, 12, or 18 units. The follower firm moves after observing the leader firm's choice, choosing to produce either 9, 12, or 18 units. Your game tree should show the firm's decision nodes and note the profit to each firm in each possible scenario. (Hint: there are nine possible outcomes in this game, each outcome including a profit for the leader firm and a profit for the follower firm.) Use the following facts to calculate the profit to each firm in each outcome of your game tree. - The price in the market depends on the total number of units produced: P=40Q1 - Q2. - Each firm has cost function C(Q)=4Q. - Therefore, the leader firm's profit from producing Q1 units, if the follower firm responds by producing Q2 units, is: (40Q1 - Q2) Q1 - 4Q1. - The follower firm's profit from producing Q2 units, if the leader firm has produced Q1 units, is (40 - Q1 - Q2)Q2 4Q2. A. Explain what the Subgame Perfect Nash Equilibrium of this game is. [2 points]

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