There is a market operating for two periods. In the first period, there is only an...

There is a market operating for two periods. In the first period, there is only an incumbent firm, and an entrant may enter in the second period. The demand function each period is p = 20 − Q, where Q is the total quantity in the market. The per period cost function of each firm is c(q) = 9 + 4q. There is no discounting. Firms choose quantities.

(a) Find the monopoly outcome with these demand and cost functions.
(b) Because of some technological constraint, the incumbent cannot choose different quantitie in the two periods: qI = qI = qI . The entrant observes the incumbent’s quantity qI and decides if to enter and, if yes, how much to produce. Find the optimal choice of the entrant for any q.
(c) Suppose that the entrant will enter. Find the optimal quantity of the incumbent.
(d) Suppose now that the entrant will enter only if it makes positive profits. Find the subgame-perfect Nash equilibrium.

Expert Solution

Where is the market operating for two periods. In the first period, there is only an incumbent firm, and an entrant may enter in second period. The demand function is period is P=20 - Q, where Q is the total quantity in the market. the par period cost function of each firm is c(q)=9+4q . There is no ...

= Given data :-

P = 20 - Q

c(q)= 9+4q

Rahul Sunny answered 11 hours ago

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There is a market operating for two periods. In the first period, there is only an...

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