10. A A and B are two firms who have a simultaneous strategic problem modeled in this table: Q=3 Q=4 Q=5 O=6 Q=3 (0.7, 0.7) (1.8, 0.1) (2.5, -0.5) (2.8,-1.1) Q=4 (0.1, 1.8) (1.0, 1.0) (1.5, 0.2) (1.6,-0.6) B O=5 (-0.5, 2.5) (0.2, 1.5) (0.5, 0.5) (0.4, -0.5) Q=6 (-1.1, 2.8) (-0.6, 1.6) (-0.5, 0.4) (-0.8,-0.8) Profits are in the form (A,B) Describe the Nash Equilibrium strategies for A and B and the resulting total production and profit levels. Show your work in determining the Nash Equilibrium so that I know that your answer is not a guess.

10. A A and B are two firms who have a simultaneous strategic problem modeled in this table: Q=3 Q=4 Q=5 O=6 Q=3 (0.7, 0.7) (1.8, 0.1) (2.5, -0.5) (2.8,-1.1) Q=4 (0.1, 1.8) (1.0, 1.0) (1.5, 0.2) (1.6,-0.6) B O=5 (-0.5, 2.5) (0.2, 1.5) (0.5, 0.5) (0.4, -0.5) Q=6 (-1.1, 2.8) (-0.6, 1.6) (-0.5, 0.4) (-0.8,-0.8) Profits are in the form (A,B) Describe the Nash Equilibrium strategies for A and B and the resulting total production and profit levels. Show your work in determining the Nash Equilibrium so that I know that your answer is not a guess.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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J 4 (Cournot Model) There are two firms (N=2), Airbus and Boeing, in the market. Each firm’s cost is MC=AC=20. The market demand is Q=100-(1/2) P. Both firms simultaneously select quantities. a) Find each firm’s reaction function. b) Find a pure Cournot Nash Equilibrium (NE). Show the market quantity and price (Q and P), each firm’s quantity and profit (qi and I, i=Airbus, Boeing), producer surplus (PS) and consumer surplus (CS) in the NE.
Please answer clearly from 2. i to iii.
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parts d and e please thank you
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8)Consider a market in which 5 companies operate, whose marginal and average costs are equal to c. The demand function is given by P(Q)= 1-Q, where P is the price and Q indicates the total quantity. Assume that companies compete with Cournot in choosing production levels. Assume that the game is repeated an infinite number of periods, that companies adopt trigger strategies and that the punishment is represented by Nash Reversion. 1)What is the value of the discount factor that allows companies to sustain tacit collusion in a balanced situation? 2) Assume now that companies are able to discover the defection of a rival company with K periods of delay. What do you think the effect on the sustainability of collusion can be? 3) Do you think that in this market collusion would be more easily sustainable if the companies compete with Bertrand? 4) If in a price-competitive market (Bertrand) N symmetrical companies operate, what would be the critical value of the discount factor that would…
11. Suppose there is a duopoly of two identical firms, A and B, facing a market inverse demand of P = 140 – 0.5Q, and cost functions of CA = 20QA and Cg = 20QB respectively. a. Find the Cournot-Nash equilibrium and profit for each firm. b. Suppose that A acts as the leader in a Stackelberg model and B responds. What are the respective quantities and profits of each firm now? Is it advantageous to move first? c. If the firms were able to collude, how much additional profit could they earn if they switch from simple single pricing to perfect price discrimination? d. Graph and label equilibria on the inverse demand.