Exercise 3 Suppose the jetski market is characterized by Cournot competition with two firms. The market inverse demand curve for is p(y) = 1,000-50y, where y is the total market output produced by Kawasaki and Yamaha. Suppose that the marginal cost for both firms is constant at $1,000. 1. Find each firm's optimal quantity and the market price if they compete. 2. Find each firm's optimal quantity and the market price if they collude. 3. What is the minimum ẞ for each firm to ensure that they collude? Assume a grim-trigger strategy. 4. Kawasaki's marginal cost rises to $1,500 due to supply chain issues. Find each firm's optimal quantity and the market price if they collude. 5. What is the minimum 3 for each firm to ensure that they collude? Assume a grim-trigger strategy. 6. Is collusion easier or harder now that the the marginal costs differ? Refer both to your ẞ answers and to logic.
Exercise 3 Suppose the jetski market is characterized by Cournot competition with two firms. The market inverse demand curve for is p(y) = 1,000-50y, where y is the total market output produced by Kawasaki and Yamaha. Suppose that the marginal cost for both firms is constant at $1,000. 1. Find each firm's optimal quantity and the market price if they compete. 2. Find each firm's optimal quantity and the market price if they collude. 3. What is the minimum ẞ for each firm to ensure that they collude? Assume a grim-trigger strategy. 4. Kawasaki's marginal cost rises to $1,500 due to supply chain issues. Find each firm's optimal quantity and the market price if they collude. 5. What is the minimum 3 for each firm to ensure that they collude? Assume a grim-trigger strategy. 6. Is collusion easier or harder now that the the marginal costs differ? Refer both to your ẞ answers and to logic.
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.3P
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Transcribed Image Text:Exercise 3
Suppose the jetski market is characterized by Cournot competition with two firms. The market inverse
demand curve for is p(y) = 1,000-50y, where y is the total market output produced by Kawasaki
and Yamaha. Suppose that the marginal cost for both firms is constant at $1,000.
1. Find each firm's optimal quantity and the market price if they compete.
2. Find each firm's optimal quantity and the market price if they collude.
3. What is the minimum ẞ for each firm to ensure that they collude? Assume a grim-trigger
strategy.
4. Kawasaki's marginal cost rises to $1,500 due to supply chain issues. Find each firm's optimal
quantity and the market price if they collude.
5. What is the minimum 3 for each firm to ensure that they collude? Assume a grim-trigger
strategy.
6. Is collusion easier or harder now that the the marginal costs differ? Refer both to your ẞ answers
and to logic.
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