In the aeronautical market, Boing and Airbus constitute a duopoly in the production of large airplanes. The American firm has the following cost structure C(qa) = 20 + 3qa + qå, and the European firm, C(qe) 150 – P, answer the following questions. = 50 + qe + q². If the market demand for large airplanes is given by Qp = qa + qe = a) Interpret the cost structures of both firms b) What would be the equilibrium (quantity, price, and profit) if firms compete by quantity as in Cournot and interpret your answer. c) If they decide to form a cartel, what are the new quantities, prices, and profits? Interpret your answer using the Game Theory insights.

In the aeronautical market, Boing and Airbus constitute a duopoly in the production of large airplanes. The American firm has the following cost structure C(qa) = 20 + 3qa + qå, and the European firm, C(qe) 150 – P, answer the following questions. = 50 + qe + q². If the market demand for large airplanes is given by Qp = qa + qe = a) Interpret the cost structures of both firms b) What would be the equilibrium (quantity, price, and profit) if firms compete by quantity as in Cournot and interpret your answer. c) If they decide to form a cartel, what are the new quantities, prices, and profits? Interpret your answer using the Game Theory insights.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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