Two firms play the Cournot game (see chapter 1) repeatedly. Let denote firm i’s output at date t,…
Two firms play the Cournot game (see chapter 1) repeatedly. Let denote firm i’s output at date t, and let A fraction ε > 0 of the good sold at date t is recycled (once). The consumers do not receive income when the good they consumed is recycled (a recycling industry purchases the old units at price 0-this ensures that consumers are myopic). The inverse demand curve at date t is Production by the duopolists is costless. Assume that is ε “small.”
(a) What is the payoff-relevant variable in this game?
