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Assignment:
Nash equilibrium through rationalizability can achieved in games with upward-sloping best-response curves if the rounds of eliminating never-best-response strategies begin with the smallest possible values. Consider the two-player Cournot game considered in class in which both firms have the same constant marginal cost c and face a linear demand curve P(Q) = α - Q. Use the best-response rules in this case (bi(qj) = 0.5(α - qj - c)) to begin rationalizing the Nash equilibrium in that game. Start with the lowest possible quantities for the two firms and describe (at least) two rounds of narrowing the set of rationalizable quantities toward the Nash equilibrium.
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