MA +q is 2. Consider an industry with quantity-setting firms that produce a homogeneous good. The...

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MA +q is 2. Consider an industry with quantity-setting firms that produce a homogeneous good. The inverse demand function for the good is p = A-Q, where Q = 9₁ +9₂ + the aggregate quantity. All firms have a cost function C = F+q²/2. Initially there are many potential firms that can enter the industry: firms first decide whether or not to enter and then all firms that entered the market compete by simultaneously choosing quantities. If a firm decides to stay out, its payoff is 0. (a) Suppose that n firms decided to enter. Compute the symmetric Nash equilibrium when all entrants choose their quantities simultaneously. (b) Given your answer to (a), how many firms will decide to enter the market? (Hint: entry will take place until the equilibrium profit of each firm that enters the market is equal to 0) (c) How does the number of entrants that you computed in (b) vary with the fixed cost F? (d) Explain the intuition for your answer. MA +q is 2. Consider an industry with quantity-setting firms that produce a homogeneous good. The inverse demand function for the good is p = A-Q, where Q = 9₁ +9₂ + the aggregate quantity. All firms have a cost function C = F+q²/2. Initially there are many potential firms that can enter the industry: firms first decide whether or not to enter and then all firms that entered the market compete by simultaneously choosing quantities. If a firm decides to stay out, its payoff is 0. (a) Suppose that n firms decided to enter. Compute the symmetric Nash equilibrium when all entrants choose their quantities simultaneously. (b) Given your answer to (a), how many firms will decide to enter the market? (Hint: entry will take place until the equilibrium profit of each firm that enters the market is equal to 0) (c) How does the number of entrants that you computed in (b) vary with the fixed cost F? (d) Explain the intuition for your answer.

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a Suppose that n firms decided to enter Compute the symmetric Nash equilibrium when all entrants choose their quantities simultaneously To compute the symmetric Nash equilibrium we need to find the qu... View the full answer