The market for bananas in Ozland is an oligopoly with two profit-maximising suppliers – Bongo Bananas and Bendy Bananas. These suppliers compete strategically by choosing a quantity of bananas to...

The market for bananas in Ozland is an oligopoly with two profit-maximising suppliers – Bongo Bananas and Bendy Bananas. These suppliers compete strategically by choosing a quantity of bananas to supply to the market. Each supplier is able to choose either 50 megatonnes or 100 megatonnes of bananas. Market demand for bananas in Ozland is represented by the following schedule: QUANTITY (MEGATONNES) PRICE ($ PER MEGATONNE) 100 100 150 75 200 50 For each supplier, the marginal cost of producing a megatonne of bananas is constant and equal to $40 per megatonne, and there are zero fixed costs. Suppose that Bongo Bananas and Bendy Bananas must simultaneously choose a quantity of bananas to supply. a Draw the game table that represents this strategic situation. b Does either player have a (strict) dominant strategy? Is there a (strict) dominant strategy equilibrium? c What is the set of Nash equilibria in the game? Suppose that Bongo Bananas has the option of committing to a choice of quantity prior to Bendy Bananas making its choice of quantity, and that Bendy Bananas observes Bongo Bananas’ quantity choice prior to making its choice. d Would you advise Bongo Bananas to accept the option of choosing its quantity first?