Determine if the statements are true or false. Justify your answer.1.In a Stackelberg duopoly, in which firms produce substitutable products and choose quantities,the leader of the industry enjoys a first mover advantage in the subgame perfect Nash equilibrium.2.) Consider a two stage sequential price decision duopoly, where firms choose prices when producingsubstitutable products and constant unit costs, where there is a leader and a follower. If the firms areasymmetric, in the sense that their unit costs are sufficiently different, then in the subgame perfect Nashequilibrium the high-cost firm has a first mover advantage, whereas the low-cost firm has a second moveradvantage.

There are different forms of market under duopoly system, such as stackelberg duopoly, cournot…

Determine if the statements are true or false. Justify your answer. 1. In a Stackelberg duopoly, in which firms produce substitutable products and choose quantities, the leader of the industry enjoys a first mover advantage in the subgame perfect Nash equilibrium.

Determine if the statements are true or false. Justify your answer. 1. In a Stackelberg duopoly, in which firms produce substitutable products and choose quantities, the leader of the industry enjoys a first mover advantage in the subgame perfect Nash equilibrium.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.5P

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Question

Determine if the statements are true or false. Justify your answer.
1.
In a Stackelberg duopoly, in which firms produce substitutable products and choose quantities,
the leader of the industry enjoys a first mover advantage in the subgame perfect Nash equilibrium.
2.
) Consider a two stage sequential price decision duopoly, where firms choose prices when producing
substitutable products and constant unit costs, where there is a leader and a follower. If the firms are
asymmetric, in the sense that their unit costs are sufficiently different, then in the subgame perfect Nash
equilibrium the high-cost firm has a first mover advantage, whereas the low-cost firm has a second mover
advantage.

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