Question: The question is about microecomics and game theory 4. (20) Consider a duopoly model with product differentiation. Two firms compete in their prices sequentially; firm

The question is about microecomics and game theory

4. (20) Consider a duopoly model with product differentiation. Two firms compete in their prices sequentially; firm 1 chooses its price first then firm 2 chooses its price second. Denote firm 1's price by p, and firm 2's price by p2. Each firm has a constant marginal cost c > 0 and no fixed cost. Demand functions faced by the two firms are, respectively, q1 = a - Pi +2 and q2 = a - P2 + p1, where a > c. (a) (14) Find the subgame perfect equilibrium outcome. State firms' equilibrium strategies. (b) (6) Construct a Nash equilibrium where the two firms charge the same price, provide firms' strategies to support this Nash equilibrium, and show that this Nash equilibrium is not a subgame perfect equilibrium

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

1. From the partial work sheet for Major Advising below, prepare an income statement. Major Advising Work Sheet (Partial) For Month Ended January 31, 20- Income Statement Balance Sheet ACCOUNT TITLE...

Can someone please help me? I could really use some help from (h) through (v). Game Theory I am posting the whole question for background information There is only one firm, Fender, in guitar market....

please help me to solve this two question. Problem 3: Cournot Competition and Price-cost Margin. The demand for a product is Q = a - P/2. If there are 4 firms in an industry and marginal cost is MC =...

Assist me expert tutors. 7531/Lessons/Problem 9%20sets/Problem 4. Assume the Fed buys a bond from a US bank for $1000, this becomes excess reserves for the bank and get loaned out, since we will...

Questions: 1. How strong are the competitive forces confronting J. Crew in the market for specialty retail? [Michael Porter] five-forces analysis to support your answer. (see chapter 3 in the textfor...

Question. 1. How strong are the competitive forces confronting J. Crew in the market for specialty retail? Include a [Michael Porter] five-forces analysis to support your answer. (see chapter 3 in...

Help here4 tutors 4. Two firms compete to sell a good. Total costs of the two firms respectively satisfy Ci(qi) = 201 and Co(q) = $3. The total output produced in the economy is Q = q1 + 92. The...

1.With reference to the Staple and Heinz-Beech Nut cases, discuss the central issues of the anticompetitive arguments. Carefully discuss the circumstances under which mergers may be undesirable and...

Pre-mixed concrete is an important input for the construction industry. Concrete cannot be stored or transported over long distances as it begins to set after only a few hours. For this reason, only...

205 econ the qquestion is complete Exercise 2 (Cournot duopoly with asymmetric firms) In a market characterized by the following (inverse) demand function P = 40 Q two firms compete `a la Cournot....

Detailed solu8tions. Problem 1 Slutsky equation Tomas is trying to figure out how to supplement the study allowances of 500 kr a week. He is considering a part-time job at a gas station. The wage is...

Korey is a business student at State U. She has just completed a course in decision models, which had a midterm exam, a final exam, individual assignments, and class participation. She earned an 86%...

You have a capital constraint for one period of R1 million, your cost of capital is 12%, you could invest surplus funds at 10%, and you are analysing the following potential indivisible projects:...

Suppose f is a differentiable function of x and y , and g ( r , s ) = f ( 4 r - s , s 2 - 6 r ) . Use the table of values below to calculate g * ( 1 , 7 ) and g ( 1 , 7 ) . \ table [ [ , f , g , f x...

Review the Inquirer to determine Digby's current strategy. How will they seek a competitive advantage? From the following list, select the top five sources of competitive advantage that Digby would...

When Harpreet borrowed money, he originally agreed to repay the loan by making three equal payments of $3000, with a payment due now, another payment due two years from now, and the final payment due...

Heather contributed $1500 at the end of each year for 12 years into a savings account. Interest earned on the savings was 4.5% compounded annually for the first eight years, then increased to 5.5%...

What is the adjusted book balance on the bank reconciliation? Book balance end of the month $5,575 Outstanding checks Deposits in transit Service charges 584 2,500 75 Interest revenue 25

Based on Hersey and Blanchards Situational Leadership model and the four leadership styles of Directing, Coaching, Supporting, and Delegating. Write a paper addressing the following issues: 1. Take a...

Maslow's pyramid is one of the most well-known theories of motivation. It is, however, very controversial. Can you think of a specific example from real life (yours or someone else's) that shows how...

3. What is meant when we say that people with a Protestant character exhibit manipulative behaviour?

An improvement in the exchange of information in negotiations.

1. Effort is important.