Two competing firms must choose their quantity of production simultaneously. Each firm can either choose a High quantity of 3 or a Low quantity of 2. The price for both firms is 9 - Q, where Q is the sum of both quantities. Costs are zero, the profit is simply price times quantity. For example, if firm 1 chooses High and firm 2 chooses Low then p- 9- (3+2) 4; payoff for firm 1 is 12 (4x 3) while payoff for firm 2 is 8 (4 x 2).
Required:
a. Draw the complete matrix for this game.
b. Find all Nash equilibria.
c. If this game were instead played sequentially, would there be a first-mover advantage? Briefly explain.
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Two competing firms must choose their quantity of production simultaneously. Each firm can either ch...
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