Problem 4. First Bank of SC (FBSC), Second Bank of SC (SBSC), and Third Bank of SC (TBSC) open branches in State College. As their names suggest, FBSC opens branches first, SBSC second after having observed FBSCâ€™s branches, and TBSC opens branches last. The cost of opening a branch is the same for all three banks at c = $3 Million. The total revenue each bank can earn from each of itsbranches, also in millions of dollars, is given byP= 43−Q.1. Write down SBSCâ€™s and TBSCâ€™s best response functions.2. Given the above, how many branches does FBSC open in State College?3. How many total branches would you expect to see in State College?4. What are each of the three banksâ€™ equilibrium branch revenues and profits?5. Suppose all three banks were to open branches simultaneously. Would total industry profits increase or decrease?6. As FBSC is about to start breaking ground on its first branch, there is public news that TBSC has lost its charter and will not be able to open any branches at all. What is the effect of this news on consumer surplus? Explain.
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