6.Two identical firms that have the cost function C(q) = 4qj, where j = {1,2} arecompeting in a homogenous good market. The two firms make simultaneous decisions on price,and they face industry demand Q(P) = 20-p.What is the Bertrand-Nash equilibrium profit of each firm?Hints for (b) and (c): Solve for each firm j's output (q;) and use the fact that Ij = p;qj - Cj(qj).b. Now, suppose the two firms are deciding whether to set a collusive market price of$6 (this means that they would both charge $6). Solve for their profits under this pricingscheme.a.C.If one of the firms decides to deviate from the collusive scheme and undercut itsrival's price by $1, how much profit would it earn?

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6. Two identical firms that have the cost function C(q) = 4q, where j = {1,2} are competing in a homogenous good market. The two firms make simultaneous decisions on price, and they face industry demand Q(P) = 20 - p. What is the Bertrand-Nash equilibrium profit of each firm? Hints for (b) and (c): Solve for each firm j's output (q;) and use the fact that II, Pjqj - Cj(qj). b. Now, suppose the two firms are deciding whether to set a collusive market price of $6 (this means that they would both charge $6). Solve for their profits under this pricing scheme. a. c. If one of the firms decides to deviate from the collusive scheme and undercut its rival's price by $1, how much profit would it earn?

6. Two identical firms that have the cost function C(q) = 4q, where j = {1,2} are competing in a homogenous good market. The two firms make simultaneous decisions on price, and they face industry demand Q(P) = 20 - p. What is the Bertrand-Nash equilibrium profit of each firm? Hints for (b) and (c): Solve for each firm j's output (q;) and use the fact that II, Pjqj - Cj(qj). b. Now, suppose the two firms are deciding whether to set a collusive market price of $6 (this means that they would both charge $6). Solve for their profits under this pricing scheme. a. c. If one of the firms decides to deviate from the collusive scheme and undercut its rival's price by $1, how much profit would it earn?

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 the differentiated goods Bertrand price competition model where firms A and B produce similar goods and sell them at pA and pB. The demand for each firm’s product is given byqA =60−2pA +pB andqB =60–2pB +pA ,and there are NO costs of producing either good (all costs are 0). (a)Calculate the (Bertrand) equilibrium prices and the net profits of each firm (b) Now suppose that -instead of competing to maximize their own individual profits- the firms decide to “collude” and set prices pA and pB to maximize their joint profits (sum of their profits). What would be each firm’s optimal price and net profits? Compare these prices and profits with what you found in (a) (greater/smaller/the same?).
please help me with the last question. Thank you
Can you show me the answer of question c and d? Thank you so much for your help
Q8
Suppose two firms, Firm A and Firm B, are competing by setting quantities (Cournot competition). Firm A has a constant marginal cost of $10 per unit; Firm B has a constant marginal cost of $15 per unit. Assume fixed costs are equal to 0 for both firms. Hint: since fixed costs are zero and the marginal cost is constant, MC = AC. The two firms choose between producing 50 units or 100 units. If the total output is 100 units, the price is $20 per unit; if total output is 150 units, the price is $15 per unit; if total output is 200 units, the price is $10 per unit. Based on the information provided, fill in the firms’ profits in the payoff matrix below with Firm A choosing the row and Firm B choosing the column. QB=100 QB=50 QA=100 , , QA=50 , , The resulting equilibrium is for Firm A to produce ____ (50 or 100)units and Firm B to produce_____ (50 or 100) units.
Two firms, A and B, sell the same good X in a market with total demand Q = 100 – P. The two firms compete on quantities and decides how much to produce simultaneously. Firm A cost function is C(qA) = 40qA. Firm B cost function is C(qB) = 60qB. 1. Find the best reply functions of both firms and represent them in a graph. 2. Find the quantity produced by each firm in a Nash equilibrium. 3. Find the firms and consumers surplus. 4. Compare the surplus of firms found above with the surplus arising when both firm cooperate to sustain a monopoly outcome. 5. Assume now that A and B compete as in a Stackelberg model. A chooses first and B chooses after observing the choice of A. Find equilibrium quantities produced by each firm and the market equilibrium price.
2. Four firms (A, B, C, and D) play a pricing game (i.e. Bertrand). Each firm (i) may choose any price Pi from 0 to ¥, with the goal of maximizing its own profit. Firms A and B have MC = 10, while firms C and D have MC = 20. The firms serve a market with the demand curve Q = 100 – P. All firms produce exactly the same product, so consumers purchase only from the firm with the lowest price. If multiple firms have the same low price, consumers divide their quantities evenly among the low-priced firms. Assume the firms choose price simultaneously. a. There are many equilibria in this simultaneous-move pricing game. Provide one equilibrium combination of prices, and argue that no firm has a unilateral incentive to deviate from these prices. Now assume firm A chooses price first. Firm B observes this choice and then chooses its own price second. Firm C chooses price third, and firm D chooses price last. b. Again, there are many equilibria in this sequential-move pricing game.…
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There are only two driveway paving companies in a small town, Asphalt, Inc. and Blacktop Bros. The inverse demand curve for paving services is ?= 2040 ―20? where quantity is measured in pave jobs per month and price is measured in dollars per job. Assume Asphalt, Inc. has a marginal cost of $100 per driveway and Blacktop Bros. has a marginal cost of $150. Answer the following questions: Determine each firm’s reaction curve and graph it. How many paving jobs will each firm produce in Cournot equilibrium? What will the market price of a pave job be? How much profit does each firm earn?
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