Consider a homogeneous product industry with three firms 1, 2, and 3 that engage in simultaneous quantity competition. All firms incur identical constant marginal cost c and no fixed cost. Inverse linear demand is given by p = 1-q where q denotes total market output. (a) Find the equilibrium quantities, price, and profits. (b) Consider now a merger between firms 1 and 2, resulting in a duopolistic market structure. In fact, the merger gives rise to efficiency gains in the sense that the merged entity produces at marginal cost e c, where e < 1. The outsider to the merger still incurs marginal cost c. Find the post - merger equilibrium quantities, price, and profits. (c) Under what conditions does the merger reduce prices? Clearly explain the step by step solution, Please be sensible and give the complete answer for the quation asked. Please solve in detail. Dont give me the chatgpt answers
Consider a homogeneous product industry with three firms 1, 2, and 3 that engage in simultaneous quantity competition. All firms incur identical constant marginal cost c and no fixed cost. Inverse linear demand is given by p = 1-q where q denotes total market output. (a) Find the equilibrium quantities, price, and profits. (b) Consider now a merger between firms 1 and 2, resulting in a duopolistic market structure. In fact, the merger gives rise to efficiency gains in the sense that the merged entity produces at marginal cost e c, where e < 1. The outsider to the merger still incurs marginal cost c. Find the post - merger equilibrium quantities, price, and profits. (c) Under what conditions does the merger reduce prices? Clearly explain the step by step solution, Please be sensible and give the complete answer for the quation asked. Please solve in detail. Dont give me the chatgpt answers
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider a homogeneous product industry with three firms 1, 2, and 3 that engage in simultaneous quantity competition. All firms incur identical constant
marginal cost c and no fixed cost. Inverse linear demand is given by p = 1-q where q denotes total market output. (a) Find the equilibrium quantities, price, and
profits. (b) Consider now a merger between firms 1 and 2, resulting in a duopolistic market structure. In fact, the merger gives rise to efficiency gains in the
sense that the merged entity produces at marginal cost e c, where e < 1. The outsider to the merger still incurs marginal cost c. Find the post - merger
equilibrium quantities, price, and profits. (c) Under what conditions does the merger reduce prices? Clearly explain the step by step solution, Please be sensible
and give the complete answer for the quation asked. Please solve in detail. Dont give me the chatgpt answers
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