i If Defendo adopts Technology A and Offendo enters the market.what will be the profit o of each firm?Would Offendo choose to enter the marke given these profits. If both firms play Cournot.each will choose its best output.taking the other's strategy as given.Letting D=Defendo and O=Offendo,the demand function will P=20-Qp-Qo Profit for Defendo will be πo=20-2o-Q)2o-00+8Qo).orxD=12Qo-Q2-QQ0-10 set the first derivative of 2=12-2Q-Q=0,orQn=6.0.5Q& This is Defendo's reaction function.Because both firms have access to the same technology,hence the same cost structure,Offendo's reaction function is analogous: Qo=6-0.5Qn Substituting Offendo's reaction function into Defendo's reaction function and solving for On Q=6.0.5)6.0.5Q=4 Substituting into Defendo's reaction function and solving for o Q0=6.0.5④0=4 ual to8 To determine price,substitut Op and ointo the demand funetion P=20-4-4=$12. The profits for each firm are equal to total revenue minus total costs: n=(12-(10+(8(4》=$6and xo=(4)12)·(10+(84)=$6. Therefore,Offendo would enter the market. ii.If Defendo adopts Technology B and Offendo enters the market,what will be the profit of each firm?Would Offendo choose to enter the market given these profits? Profit for Defendo will be Tp=(20-2p-0)p-(60+20p).or p=18Qp-Qi-QpQo-60 The change in profit with respect to Q isi. If Defendo adopts Technology A and Offendo enters the market, what will be the profit of each firm? Would Offendo choose to enter the market given these profits? If both firms play Cournot, each will choose its best output, taking the other’s strategy as given. Letting D = Defendo and O = Offendo, the demand function will be P = 20 - QD - QO. Profit for Defendo will be  D = 20 − QD − QO ( )QD − 10 + 8QD ( ) , or  D =12QD −QD −QDQO −10 2 To determine the profit-maximizing quantity, set the first derivative of profits with respect to QD equal to zero and solve for QD:   D D D O Q = 12 − 2Q −Q = 0 , or QD = 6 - 0.5QO. This is Defendo’s reaction function. Because both firms have access to the same technology, hence the same cost structure, Offendo’s reaction function is analogous: QO = 6 - 0.5QD. Substituting Offendo’s reaction function into Defendo’s reaction function and solving for QD: QD = 6 - (0.5)(6 - 0.5QD) = 4. Substituting into Defendo’s reaction function and solving for QO: QO = 6 - (0.5)(4) = 4. Total industry output is therefore equal to 8. To determine price, substitute QD and QO into the demand function: P = 20 - 4 - 4 = $12. The profits for each firm are equal to total revenue minus total costs: D = (4)(12) - (10 + (8)(4)) = $6 and O = (4)(12) - (10 + (8)(4)) = $6. Therefore, Offendo would enter the market. ii. If Defendo adopts Technology B and Offendo enters the market, what will be the profit of each firm? Would Offendo choose to enter the market given these profits? Profit for Defendo will be  D = 20 − QD − QO ( )QD − 60 + 2QD ( ) , or  D =18QD −QD −QDQO − 60 2 . The change in profit with respect to QD is