Answer Happy

QUESTION (5) The market demand for a good is described by the following inverse demand function: PQ)= a-lif esa 0 if Q>a where 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:(9) = q where q, denotes firm i's output quantity, hence Q=9+9+93. Consider a two stage non-cooperative game. At Stage I Firm 1 produces quantity 9, then at Stage II Firm 2 and Firm 3 observe the first stage quantity and then move simultaneously and produce 92 and 93- (a) (b) (b.i) (b.ii) 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