Consider the following Cournot model.• The inverse demand function is given by p = 30 –Q, where Qqi + q2.Firm 1's marginal cost is $6 (c1 = 6). Firm 2 uses a newtechnology so that its marginal cost is $3 (c2 = 3). There is nofixed cost.%3DThe two firms choose their quantities simultaneously andcompete only once. (So it's a one-shot simultaneous game.) d.Suppose there is a market for the technology used byFirm 2. What is the highest price that Firm 1 is willing to pay forthis new technology?Now let's change the setup from Cournot competition toe.Bertrand competition, while maintaining all other assumptions.What is the equilibrium price?f.Suppose the two firms engage in Bertrand competition.What is the highest price that Firm 1 is willing to pay for the newtechnology?

GIVEN P = 30 - Q Q = q₁ + q₂

Consider the following Cournot model. • The inverse demand function is given by p = 30 –Q, where Q qi + q2. • Firm 1's marginal cost is $6 (c1 = 6). Firm 2 uses a new technology so that its marginal cost is $3 (c2 = 3). There is no fixed cost. • The two firms choose their quantities simultaneously and compete only once. (So it’s a one-shot simultaneous game.)

Consider the following Cournot model. • The inverse demand function is given by p = 30 –Q, where Q qi + q2. • Firm 1's marginal cost is $6 (c1 = 6). Firm 2 uses a new technology so that its marginal cost is $3 (c2 = 3). There is no fixed cost. • The two firms choose their quantities simultaneously and compete only once. (So it’s a one-shot simultaneous game.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Untied and Air ’R’ Us are the only two airlines operating flights between Collegeville and Bigtown. Each airline can charge either a high price or a low price for a ticket. The accompanying matrix shows their payoffs, in profits per seat (in dollars), for any choice that the two airlines can make. Suppose the two airlines play a one-shot game—that is, they interact only once and never again. What will be the Nash (noncooperative) equilibrium in this one-shot game? Explain why this is the likely outcome. Now suppose the two airlines play this game twice. Each airline then considers the future and decides on a “tit-for-tat” strategy, that is, it starts off charging the high price in the first period, and then in the second period it does whatever the other airline did in the previous period. If both play this…
Microsoft and a smaller rival often have to select from one of two competing technologies. The rival always prefers to select the same technology as Microsoft (because compatibility is important), while Microsoft always wants to select a different technology from its rival. Describe the equilibrium of this game.
Consider the following game matrix with two players- Player 1 and Player 2 with their respective strategies. Which of the following statements is correct such as x>y>b>a Players Player2 Player 1 A B C D (Y, Y) (b, x) (x, a) (AE) is the one of many Nash equilibria (C) is the unique Nash equilibria (C. D) is the unique Nash equilibria (A. E) and (B. F) are two Nash equilibria E (a, b) (x, y) (y, a) F (a,x) (a, b) (b, b)
Read-a-lot Bookstore and Frontier Books are competitors in the Carlton retail book market. Each has a choice of setting a low price or high price. The payoffs from the price choices are: Assume that the game is played sequentially with Frontier making a decision about its choice of price strategy, and then Read-a-lot, after observing Frontier’s strategy, chooses its price strategy. What is the best choice for Frontier? [To answer this question, you need to take into account your answer for question 1 regarding the best strategy for Read-a-Lot.] a. Low price b. High price c. Frontier is indifferent between High price and Low price d. It is not possible to identify a best choice for Frontier.
Consider an example of the prisoner's dilemma where 2 firms are making sealed bids on a highway-construction contract and each firm is allowed to bid either $120 million or $130 million. If both firms bid the same price, the job is shared equally and each firm earns half the value of its bid. Otherwise the lowest bidder wins the contract and receives the full value of its bid (and the other bidder earns zero). The non-cooperative outcome in this situation is O A. both firms bid $130 million. B. one firm bids $120 million, the other firm bids $130 million. C. both firms bid $60 million. D. both firms bid $120 million. O E. both firms bid $65 million. OO
1. Consider the following Cournot model. The inverse demand function is given by p = 30 –Q, where Q = qi + q2. Firm 1's marginal cost is $6 (c1 = 6). Firm 2 uses a new technology so that its marginal cost is $3 (c2 = 3). There is no fixed cost. The two firms choose their quantities simultaneously and compete only once. (So it’s a one-shot simultaneous game.) Answer the following questions. а. Derive Firm 1 and Firm 2's reaction functions, respectively. b. Solve the Nash equilibrium (qı", q2"). What is the equilibrium price and what is the profit level с. for each firm?
Suppose that there are only two firms in a market in which demand is given by p = 64 - Q, where Q is the total production of the two firms. Each firm can choose either a low level of output, qL = 15, or a high level of output, qH = 20. The unit cost of production for both firms is $4. Write down the normal-form representation of the game in which the strategic variable for each firm is the quantity of output and the firms make their choices simultaneously. Find the pure strategy Nash equilibrium of this game (quantities produced and market price).
Can you help me solve this problem please?
I selected answer "B", which was surprisingly incorrect. What say you? What would you pick as the correct choice?
Two firms are competing to establish one of two new wireless communication standards, A or B. A strategy is a choice of standard, and an outcome of this game is a choice of standard by each firm – for example, (A, B) represents the case where Firm 1 decides to develop standard A and Firm 2 develops standard B. Here, the first letter will always correspond to Firm 1’s decision, and the second letter to Firm 2’s decision. Firm 1 has the following preferences over outcomes, in order of highest to lowest preferred: it prefers (A, A) to (B, A) to (A, B) to (B, B). Firm 2 prefers (A, B) to (A, A) to (B, A) to (B, B). Suppose that firms simultaneously decide which standard to develop. What is the pure strategy Nash equilibrium? Is the answer (B,B)? If not please explian what is the answer?
Two firms X and Y compete with each other. Firm X can produce one of three products X1, X2, or X3. Similarly, firm Y can produce one of three products Y1, Y1, and Y3. Each firm's profit depends on its own and its competitor's decision about which product to produce. These profits are given in the table below where each cell presents profits corresponding to a pair of chosen strategies with the first number being the profit of firm X and the second being the profit of firm Y. For example, if X chooses to produce X3 and Y chooses to produce Y1, the profit of X will be $15 and the profit of Y will be $20. The firms make their product choice decisions simultaneously and independently of each other. Y1 Y2 Y3 X1 0, 0 12, 8 16, 16 15, 20 18, 9 20, 15 8, 12 18, 18 9, 18 X2 X3 11) Does this game have any equilibrium in dominant strategies? If yes, find all of them. 12) In addition to the equilibria (if any) you found in the previous question, does this game have any other equilibria? If yes,…
Suppose two firms (A and B) are competing in price. Each firm can charge either High or Low price and the payoffs (profit or loss) from these strategies are presented below: Firm B High 50, -40 10, 10 Low Firm A Low 0,0 High -40, 50 a. Find all pure strategy Nash equilibria b. If this game is played ten times by these two firms, find all pure strategy Nash equilibria c. Suppose this game is played infinitely and these firms agreed to charge high price in order to earn profits of Gh10 each but a firm will charge low price if its rival cheats. Find the a discount rate that will cause a firm to cheat d. Suppose the discount rate is 40% will the collusion strategies constitute a Nash Equilibrium