Question: Please help this (10 pts) Consider an industry with the inverse demand function P(Q) = a. Q, Where Q is the sum of the outputs

Please help this

Please help this (10 pts) Consider an industry with the inverse demand

(10 pts) Consider an industry with the inverse demand function P(Q) = a. Q, Where Q is the sum of the outputs ql and Q2 of the two firms in the industry. Each rm can produce any nonnegative amount of the output at zero cost. In addition, before they make their output decisions, firm 1 can advertise to increase demand: it chooses a at cost C(e) = e? Thus, given (a, (11,032) their payoffs are m=(eq192)q1 C(e) and 2 = (eq1 qz)q2. (a) (2 pts) Suppose firm 1 chooses ql at the same time as it chooses a, and that rm 2 sees both Q1 and a before it chooses Q2. Describe the nature of a strategy for each rm in this game. (b) (8 pts) Find the subgame perfect equilibrium, and its outcome, of the game in (a)

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