Timing game. Use the results of the previous exercise to solve for the Nash equilibria of the…

Timing game. Use the results of the previous exercise to solve for the Nash equilibria of the…
 Timing game. Use the results of the previous exercise to solve for the Nash equilibria of the endogenous timing game in which firms simultaneously choose whether to play “early” or to play “late”. If they both make the same choice (either “early” or “late”), the simultaneous Bertrand game follows: if they make different choices, a sequential game follows with the firm having chosen “early” being the leader. The payoffs are the equilibrium profits in each scenario. Discuss the economic intuition of the equilibria found. = 3 11. (20 points) Sequential price-setting with differentiated products. Consider a market with two horizontally differentiated products with the demand system given by Qi (Pi, Pj) = a – 2pi +P; for i, j = 1,2. Suppose that firm 1 has marginal cost ci = O and firm 2 has c2 = c and assume a > c> a > 0. The two firms compete in prices. a. (7 points) Compute the firms' equilibrium profits at the Nash equilibrium of the simultaneous Bertrand game. Determine which firm obtains the higher profit level. 1 b. (8 points) Compute the firms’ subgame perfect Nash equilibrium profits of the sequential scenario when i) firm 1 is the leader, and ii) when firm 2 is the leader. c. Determine whether firm 2 has a second-mover advantage and firm 1 has a first-mover advantage. Explain.   May 05 2022 06:27 PM

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