Consider a setting of two competing firms F1 and F2. Both firms maximize their profits and provide a homogeneous ouput q; with (i = 1, 2) at market price p. Assume market clearing prices and non-negative outputs. Assume further, that the firms engage in quantity competition. The inverse market demand function is: p(q) = 41 – q, where q = q1 + 92 The cost functions are: C1 = 2q1, C2 = % Assume F2 is the dominant firm. a) Should F2 prefer to play Cournot duopoly or Stackelberg competition in a one shot game?

Consider a setting of two competing firms F1 and F2. Both firms maximize their profits and provide a homogeneous ouput q; with (i = 1, 2) at market price p. Assume market clearing prices and non-negative outputs. Assume further, that the firms engage in quantity competition. The inverse market demand function is: p(q) = 41 – q, where q = q1 + 92 The cost functions are: C1 = 2q1, C2 = % Assume F2 is the dominant firm. a) Should F2 prefer to play Cournot duopoly or Stackelberg competition in a one shot game?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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**Practice**
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Note: Hand written solution is not accepted.
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