a. Firm 1 chooses q₁ SMALLER than the static best response to q2 because this moves total output closer to the monopoly output.92LARGER than the static best response to 9₂ because this moves total output closer to the monopoly output.b. Firm 1 chooses 9₁c. 9₁Consider a Stackelberg duopoly in which firm 1 sets q 1'2°, firm 2 observes q, and then chooses q1is a static best response to 9292O d. Firm 1 chooses q₁ LARGER than the static best response to because this results in a smaller

Consider a Stackelberg duopoly in which firm 1 sets q₁₁ , firm 2 observes q, and then chooses q 1 2° O a. Firm 1 chooses q, SMALLER than the static best response to q2 because this moves total output closer to the monopoly output. 1 ●b. Firm 1 chooses q₁ LARGER than the static best response to a because this moves total output closer to the monopoly output. ¹2 1 OC. 9₁ is a static best response to 92 92 O d. Firm 1 chooses q, LARGER than the static best response to q because this results in a smaller 1

Consider a Stackelberg duopoly in which firm 1 sets q₁₁ , firm 2 observes q, and then chooses q 1 2° O a. Firm 1 chooses q, SMALLER than the static best response to q2 because this moves total output closer to the monopoly output. 1 ●b. Firm 1 chooses q₁ LARGER than the static best response to a because this moves total output closer to the monopoly output. ¹2 1 OC. 9₁ is a static best response to 92 92 O d. Firm 1 chooses q, LARGER than the static best response to q because this results in a smaller 1

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 a game where a potential market Entrant is trying to decide whether or not to enter the market. An Incumbent monopolist is established and can choose to cut the price, maintain the price, or raise the price in hopes of deterring the Entrant from entering. Incumbent Entrant Enter Stay Out Cut Price -4,4 0,9 Maintain Price 4,6 0,12 Raise Price 5,5 0, 13 a) Suppose the Entrant and the Incumbent make their decisions simultaneously. Is there a pure strategy Nash equilibrium? If so, what is it? b) Suppose the players move sequentially, and that the Entrant moves first. Set up the game tree and solve for the equilibrium path. Can the Incumbent deter entry? Explain. c) Now suppose that the Incumbent moves first. Again, set up the game tree. What is the subgame perfect Nash equilibrium outcome now? Can the Incumbent deter entry now?
9.17
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Please help with #4- A and B
There are two firms in the market (duopoly). These two firms are competingsimultaneously. The first firm chooses its output level (x) by predicting the second firm’soutput (y). Let c denote the total cost function c(x) = x and c(y) = y. Also, let’s assumethat the inverse demand function is p(Y) = 7 - Y where Y = x + y. (1) Obtain the reactionfunction of the first firm. (2) Find the equilibrium (output and profit of each firm) whentwo firms simultaneously compete