
Game Theory, Dixit
I'm using the Dixit model...
The inverse market demand function is:
$\displaystyle p=100 \frac{q}{2}$
$\displaystyle w=10 \,$
$\displaystyle r=30$
To start I have to find firm 2's (the entrant) best response function after it has decided to enter.
I have:
$\displaystyle q_2=\frac{100\frac{q_1}{2}(w+r)}{2}$
$\displaystyle =\frac{20080q_1}{4}$
$\displaystyle =\frac{120q_1}{4}$
Look good?

Or is it:
$\displaystyle q_2=\frac{100wr}{2*(1/2)}\frac{q_1}{2}$
$\displaystyle =60\frac{q_1}{2}$