1) Consider the following two finite versions of the Cournot duopoly model where inverse demandis given by P = a-Q (Q-q1 + q2 and a > Q> 0) and marginal cost is a constant c for each firm.First, suppose each firm must choose either half the monopoly quantity, qm/2 = (a – c)/4, or theCournot equilibrium quantity, qe = (a - c)3. No other quantity choices are feasible. Show that thistwo-action game is equivalent to the Prisoner's Dilemma: i) each firm has a strictly dominatedstrategy and ii) both firms are worse off in qquilibrium than they would be if theycooperated. (Hint: calculate each firm's payoff for possible outcome combinations)

Cournot contest is a financial model where contending firms pick an amount to deliver autonomously…

Answered: 1) Consider the following two finite…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider two Cournot oligopolists, firm 1 and firm 2, in a homogenous product market. The market demand is P = 100 - 3Q and each firm has a constant marginal cost MC=10. The market price of equilibrium and total quantity in the market is: Select one: O a. P* 30 and Q* = 20 O b. P* 40 and Q* = 20 ○ C. P* 40 and Q* = 30 d. P20 and Q* = 30
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If the inverse demand for bean sprouts were given by P(Y) = 430 − 2Y and the total cost of producing Y units for any firm were TC(Y) = 10Y and if the industry consisted of two Cournot duopolists, then in equilibrium each firm's production would be
The market demand in a homogeneous-product Cournot duopoly is P = 100 - 2Q, where Q = Q1 + Q2 (Firm 1 and Firm 2), and the costs functions for each firms are: TC1 = 12Q1 and TC2 = 20Q2. Instructions: Use no decimals. Use the average cost to calculate monopoly profits. Do not round if values are used to complete other calculations. Complete the following table. Q1 Q2 P Profits F1 Profits F2 F1 cheats w/ QDC, F2 colludes F1 cheats w/ QBRF, F2 2 colludes
Two firms are engaged in Cournot (simultaneous quantity) competition. Market-level inverse demand is given by P = 160 − 4Q Firm 1 has constant marginal costs of MC1 = 8, while Firm 2 has constant marginal costs of MC2 = 24. 1) Does there exist a low enough positive marginal cost for firm 1 such that firm 1 acts like a monopoly in this market, if so what is the MC if not why?
3
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All question are with regards to the following set up. There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities qa and qB. Inverse demand is P(qA + qB) = 18 – qA – qB and costs are C(q) (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells qB units, firm B receives a payment of s * qB from the government.) You must show your work at each step, unless the questions is followed by "No work required." 3 * q for both firms. Firm B is a domestic firm (4) We now consider the government’s choice of s≥0. We can see from above thatprofits and outputs depend upon s. With that in mind, let πB(s) and qB(s) denote firm B’s profit and output as a function of the subsidy s. Let qA(s) denote firm A’s equilibrium output as a function of s. Let G(s) = πB(s) − s*qB(s) denote the government’s objective…
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Consider a Cournot oligopoly with two firms, where the demand curves are given by P, = 100-Q,-2Q2 P2= 100-2Q,-Q2 and that costs are given by TC(Q,) = Q'1. MC, = 2Q1, TC(Q2) = Q²2, and MC2 = 2Q2. Also, marginal revenues can be written as MR, = 100-2Q,-2Q2. MR2= 100- 2Q, - 2Q2. Solve for each firm's profit. Profit for firm 1= 600, Profit for firm 2= 300 Profit for firm 1= 300, Profit for firm 2= 600 Profit for firm 1= 555.55, Profit for firm 2= 555.55 O Profit for firm 1= 0, Profit for firm 2= 0
Part c please Suppose four Cournot competitors face an inverse market demand curve of P = 1620 – 8Q, each with identical costs Ci = 4000 + 60qi. Use the formulae given in exercise 8.15 (pgs. 214-15) for firm profits, market price, and consumer surplus at a Cournot equilibrium to answer the following questions. a. Demonstrate that a merger between F3 and F4 will not be profitable if their costs remain unchanged. (Careful: the “n” in the profit formula changes from 4 to 3.) b. Could the merger be profitable i. if fixed costs fell? If so, how much reduction is necessary? ii. If the variable costs of the merged firm fell by 75%, so that C3|4 = 8000 + 15q? (Fixed cost remains 8000 because we are assuming only variable costs fall.) c. Calculate the consumer surplus created in this market when there are four identical firms. How does it change after a merger occurs between F3 and F4 if: i. no costs savings occur ii. the merged firm reduces its fixed costs by $6000 iii. the merged firm…
Suppose the iceberg lettuce industry is a Cournot duopoly with two firms: Xtra Leafy (a) and Yummy Farms (y). Xtra Leafy produces q units of output and Yummy Farms produces qy units of output. Aggregate market output is Q = x + y. The (inverse) market demand schedule is: p = 176 - 2Q Both firms have identical cost structures: MC = MC₁ = ATC₂ = ATC₁ = $12 Find Xtra Leafy's Cournot reaction function of the form: 9x = a + bay Where "a" is the reaction function's intercept and "b" is its slope. Note: Please review the formatting instructions above. If any value is negative, be sure to include its negative sign. a. a= b. b = Hint: One of your answers will be negative. Think about why.

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