= 4) Two firms are engaged in Cournot competition: each simultaneously produces a quan- tity qi and then the price is de

[answerhappygod]

4 Two Firms Are Engaged In Cournot Competition Each Simultaneously Produces A Quan Tity Qi And Then The Price Is De 1 (265.35 KiB) Viewed 96 times

= 4) Two firms are engaged in Cournot competition: each simultaneously produces a quan- tity qi and then the price is determined based on the total quantity Q from demand by P(Q) = 18 – Q. Each firm is identical, with marginal cost c= 6. Suppose that a third firm exists that does not compete in this market, but has developed technology that could make the production process for this market more efficient. If either competing firm were to adopt this technology, its marginal cost would be reduced to zero. For simplicity, assume that the third firm can provide the technology at no cost to itself. a) Suppose that the third firm can only sell its technology to firm 1. What price will the third firm charge for the technology? What will the resulting payoffs for the firms be? b) Suppose that the third firm can sell its technology to both firms. It does so by giving sequential offers to each firm. First, it offers a price pi to firm 1 for its technology, which then decides whether to purchase the technology. After the outcome of this transaction is revealed (either firm 1 purchases or does not), the third firm offers a price p2 to firm 2 for its technology, which then decides whether to purchase. After this outcome is revealed, the firms compete in the market. Find all subgame perfect Nash equilibria of this game. c) Given the structure of part (c), is the third firm better or worse off selling to both firms instead of just firm 1? d) Consider the same structure as part (b), but suppose that regulations prohibit the third firm charging different prices to each firm. Thus, the third firm sets the price p, then offers this price to firm 1. The outcom eof the transaction is revealed, then this price is offered to firm 2. Find all subgame perfect Nash equilibria of this game.