Ja-Q ifQsaQUESTION (5) The market demand for a good is described by the following inverse demand function:P(Q) =ifQ> awhere Q is total quantity demanded, P(Q) is the market price and a >0. Three firms, i = 1, 2,3, have identical cost functions:C,(q.) = q where q, denotes firm i's output quantity, hence Q = q, +q, + q3 Consider a two stage non-cooperative game. At Stage IFirm 1 produces quantity q, then at Stage II Firm 2 and Firm 3 observe the first stage quantity and then move simultaneously and produce q,and q3.(а)How many sub-games are there in this game? Describe the sub-games.Use backwards induction solution method by identifying the history of the game and specifying correct anticipations for later stages.Find all subgame Nash equilibria of the game.Find the sub-game perfect outcome of the game(b)(b.i)(b.ii)

The question given involves three firms - Firm 1, Firm 2, and Firm 3. These firms are engaged in…

(a) (b) How many sub-games are there in this game? Describe the sub-games. Use backwards induction solution method by identifying the history of the game and specifying correct anticipations for later stages. (b.i) Find all subgame Nash equilibria of the game. (b.ii) Find the sub-game perfect outcome of the game

(a) (b) How many sub-games are there in this game? Describe the sub-games. Use backwards induction solution method by identifying the history of the game and specifying correct anticipations for later stages. (b.i) Find all subgame Nash equilibria of the game. (b.ii) Find the sub-game perfect outcome of the game

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.9P

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