Three firms (A, B, and C) play a simultaneous-move quantity competition game in which they can...

Three firms (A, B, and C) play a simultaneous-move quantity competition game in which they can choose any Qi ∊ [0, ∞). Firms A and B have cost functions of Ci = 10Qi, while firm C has C(Q) = 4Q. The firms face the demand curve P = 40 – 0.01(QA + QB + QC).

a. What are the three firms’ response functions?

b. What are the firms’ equilibrium quantities?

c. What is the equilibrium market price, the firms’ profit levels, and the amount of consumer surplus?

Expert Solution

Rahul Sunny answered 2 years ago

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