2 (modified). Suppose that duopolists A and B produce substitute, bul prodt simultaneously, choosing any price on (0,200]. Letting PA and P denote their prices, demand for product A is given by: D^ - 100-3P^ +P', and demand for product B is given by D" - 100-3p" +P. (The latter demands are correct if prices imply non-negative demand; otherwise demand is 0.) Each duopolist has constant marginal cost equal to 20 (and no fixed costs). Suppose that the duopolists set their prices sequentially, specifically first duopolist I and then duopolist 2. Duopolist 2 observes duopolist l's price before they set their price. Assume the duopolists maximize profits. a. Write out the payofr functions for each. b. Describe the strategy sets for cach (at least in a general sense). c. What is duopolist 2's credible strategy? d. Find SPNE. (Show your work.)

2 (modified). Suppose that duopolists A and B produce substitute, bul prodt simultaneously, choosing any price on (0,200]. Letting PA and P denote their prices, demand for product A is given by: D^ - 100-3P^ +P', and demand for product B is given by D" - 100-3p" +P. (The latter demands are correct if prices imply non-negative demand; otherwise demand is 0.) Each duopolist has constant marginal cost equal to 20 (and no fixed costs). Suppose that the duopolists set their prices sequentially, specifically first duopolist I and then duopolist 2. Duopolist 2 observes duopolist l's price before they set their price. Assume the duopolists maximize profits. a. Write out the payofr functions for each. b. Describe the strategy sets for cach (at least in a general sense). c. What is duopolist 2's credible strategy? d. Find SPNE. (Show your work.)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 1E

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