1. An oligopoly contains N identical firms. The cost function is convex in output. Show that if the firms act as Cournot competitors then as N increases the market price will approach the competitive price.
2. Two identical firms consider entering a new market; setting up in the new market incurs a once-for-all cost k > o; production involves constant mar- ginal cost c. If both firms enter the market Bertrand competition then takes place afterwards. If the firms make their entry decision sequentially, what is the equilibrium?