Consider two duopolists whose demand functions are given by 91 = 2-2p1 - P2, and q2 = 2-2p2 - P1 where 91, 92, P₁ and p2 are quantities and prices. Their constant marginal costs are given by C1, C2 Assume that c2 = 1 is known to both firms, but c₁ is known only to firm 1. Firm 2 knows that c₁ car be either 1.2, or .8, with equal probabilities. The firms compete in prices in a simultaneous move game Define Firm 2's equilibrium price as p2. Define Firm 1's equilibrium as pth if its cost is high and pil i its cost is low. Then, equilibrium prices will be such that: 8 (a) pt¹ < p < p < 10 *h 10 (b) pil

Consider two duopolists whose demand functions are given by 91 = 2-2p1 - P2, and q2 = 2-2p2 - P1 where 91, 92, P₁ and p2 are quantities and prices. Their constant marginal costs are given by C1, C2 Assume that c2 = 1 is known to both firms, but c₁ is known only to firm 1. Firm 2 knows that c₁ car be either 1.2, or .8, with equal probabilities. The firms compete in prices in a simultaneous move game Define Firm 2's equilibrium price as p2. Define Firm 1's equilibrium as pth if its cost is high and pil i its cost is low. Then, equilibrium prices will be such that: 8 (a) pt¹ < p < p < 10 *h 10 (b) pil

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

course: advanced microeconomics

(please show the steps)

-
=
Consider two duopolists whose demand functions are given by 9₁ = 2 — 2p1 – P2, and q2 = 2 − 2p2 − P1,
where 91, 92, p₁ and p2 are quantities and prices. Their constant marginal costs are given by C₁, C₂.
Assume that c₂ 1 is known to both firms, but c₁ is known only to firm 1. Firm 2 knows that c₁ can
be either 1.2, or .8, with equal probabilities. The firms compete in prices in a simultaneous move game.
Define Firm 2's equilibrium price as p. Define Firm 1's equilibrium as pth if its cost is high and
Pi if
its cost is low. Then, equilibrium prices will be such that:
*h
*l
*h
8
(a) pt¹ <p₂ <pth < 10
*h
*l
Pi
(b) p₁¹ < P₂ = <ph
pi
P2
8
10
7
10
*h
8
(c) = P₁¹ = 0
Pi
10
*
<P2 Pi
7
*h
9
*
(d) pt¹ < < P₂ <p₁h = 10
pi 10

Study of decisions made by households and business firms at an individual level. It includes several laws and theorems related to demand, supply, production, allocation of resources, and prices.

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