Comparative Economies: Two high-tech firms (1 and 2) are considering a joint ven

Question

Comparative Economies: Two high-tech firms (1 and 2) are considering a joint venture. Each firm i can invest in a novel technology and can choose a level of investment at a cost of (think of Xi as how many hours to train employees or how much capital to spend for R&D; labs). The revenue of each firm depends on both its investment and the other firm's investment. In particular if firms i and j choose Xi and Xj, respectively, then the gross revenue to firm i is Write down mathematically and draw the profit function (gross revenue minus costs) of firm i as a function of Xi for three cases: What is the best-response function of firm i ? It turns out that there are two identical pairs of such firms; that is, the description applies to both pairs. One pair is in Russia, where coordination is hard to achieve and businesspeople are very cautious, and the other pair is in Germany, where coordination is common and

Explanation / Answer

your part c is incomplete, rest of the answers are here,

dont mind the graph in the first picture.

http://imgur.com/1wpursy

http://imgur.com/3fPsPXT

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