Game Theory, Dixit

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November 11th 2010, 04:27 AM
MichaelMath

Game Theory, Dixit

I'm using the Dixit model...

The inverse market demand function is:

$p=100- \frac{q}{2}$

$w=10 \,$

$r=30$

To start I have to find firm 2's (the entrant) best response function after it has decided to enter.

I have:

$q_2=\frac{100-\frac{q_1}{2}-(w+r)}{2}$

$=\frac{200-80-q_1}{4}$

$=\frac{120-q_1}{4}$

Look good?
November 11th 2010, 05:09 AM
MichaelMath

Or is it:

$q_2=\frac{100-w-r}{2*(1/2)}-\frac{q_1}{2}$

$=60-\frac{q_1}{2}$

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