Question: Game Theory Entry Deterrence 2: Consider the Cournot duopoly game with demand p = 100 - (q, + q2) and variable costs c; (q;) =

Game Theory

Entry Deterrence 2: Consider the Cournot duopoly game with demand p = 100 - (q, + q2) and variable costs c; (q;) = 0 for i E {1, 2). The twist is that there is now a fixed cost of production k > 0 that is the same for both firms. a. Assume first that both firms choose their quantities simultaneously. Model this as a normal-form game. b. Write down the firm's best-response function for k = 1000 and solve for a pure-strategy Nash equilibrium. Is it unique

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