Question

Player 2 Left Right Player 1 Up 10,10 2,5 Down 5,2 2,2 6. If the game in #5 is sequential what is the equilibrium? 7. What does Common Knowledge of the game mean and why is it important? 8. Consider the following market with two firms. Suppose that firms produce identical goods and are faced with the inverse market demand curve P = 100 - 20. Further, suppose that firms have identical cost functions of C = 10 + 20q. If the firms are forced to make production choices simultaneously, what are the equilibrium amounts of output each firm chooses? 9. For question 8, what is the market clearing price determined by the output of the firms? What are the firms' profits? 10. Resolve question where one of the firms moves first. Once you have solved the equilibrium outputs discuss the existence of either a first or second mover advantage. 11. Suppose instead of Firm 2 having identical costs to Firm 1, they had a cost function of C= 10+ 100. What would the equilibrium of market be if the firms moved simultaneously as in question #8? 12. Consider a completely new market where there are three firms competing. These firms produce identical goods. Firms compete by selecting the price at which they will offer their product Sunnoce that the cost for Firme Land 2 ora -150 and for the third firm the sec

Answer 1

P 100-2-2 profit foadren af irmt , Pan-C (100-201-29) - 10-20% to0-2-22-10-209 491-2902 - 20 0 100 Coty = ४ ০ - () 291 +92 40 Parz-C (100-241-29/2) -10-2092 492-291- 200 l00 ram and ) x2 +92 40 ya +492 -80 -312-4O 40 = 10 3 120-80 40 40 ard 40-2 17 3 3 40 are egrleul of antps So amd 100-a 140 300-160 2100-2 3 3