Question: Consider a problem of choosing capacity limits. In the first period, each of the two companies, i=1; 2, decides its capacity q at cost

Consider a problem of choosing capacity limits. In the first period, each of the two companies, i=1; 2, decides its capacity q at cost 4q. In the second period, the two companies choose a unit price p(i) and produce 0 < i i At zero cost. (A) Suppose we have Efficient Rationing in the second period. Determine all the SPES in the game. (B) What happens if instead of Efficient Rationing we assume Proportional Rationing?

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To analyze the given scenario we need to delve into both parts of your question considering different rationing mechanisms Lets begin by setting up the game Game Setup 1 Period 1 Capacity Choice Compa... View full answer

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