In the classic Bertrand model of oligopoly (e.g., a duopoly with no capacity constraints, product differentiation or innovation), price for each firm will be set options: 1-below MC 2-at the monopoly price 3-at MC 4-above MC

In the classic Bertrand model of oligopoly (e.g., a duopoly with no capacity constraints, product differentiation or innovation), price for each firm will be set options: 1-below MC 2-at the monopoly price 3-at MC 4-above MC

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 2P

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The kinked oligopoly demand curve is a result of the assumption by an oligopolist that a. price increases will be matched, but price reductions will not. b. price increases will not be matched, but price reductions will. c. both price increases and price reductions will be matched. d. neither price increases nor price reductions will be matched.
A common characteristic of oligopolies is a. interdependence in pricing decisions. b. independent pricing decisions. c. low industry concentration. d. few or no plant-level economies of scale.
In the classic Bertrand model of oligopoly (e.g., a duopoly with no capacity constraints, product differentiation or innovation), price for each firm will be set: at the monopoly price above MC at MC below MC
1) Consider the following two finite versions of the Cournot duopoly model where inverse demand is given by P = a-Q (Q-q1 + q2 and a > Q> 0) and marginal cost is a constant c for each firm. First, suppose each firm must choose either half the monopoly quantity, qm/2 = (a – c)/4, or the Cournot equilibrium quantity, qe = (a - c)3. No other quantity choices are feasible. Show that this two-action game is equivalent to the Prisoner's Dilemma: i) each firm has a strictly dominated strategy and ii) both firms are worse off in qquilibrium than they would be if they cooperated. (Hint: calculate each firm's payoff for possible outcome combinations)
Which of the following best represents the pricing behavior of firms in an oligopolistic market? A) Stay*Put Clothespins takes the market price of clothespins as given and produces the amount of clothespins where marginal revenue equals marginal cost. B) Unykdrugs, Inc. produces where its marginal revenue is equal to its marginal cost and prices on its downward-sloping demand curve such that the market for its product clears, knowing it will not face competition due to patents it holds on its products. C) Teen Angle Hardware looks for a niche to sell its hardware products to teens but finds it difficult to earn anything more than normal profit due to other hardware stores also looking for niches. D) Looking Over Your Shoulder Handbag Co. chooses the price it charges by estimating what its rivals are most likely to do and then taking their responses into consideration.
Consider a Stackelberg duopoly:There are two firms in an industry with demand Q = 1 − Pd.The “leader” chooses a quantity qL to produce. The “follower” observes qL and chooses a quantity qF.Suppose now that the cost function is Ci(qi) = qi2 for i = L, F. (a) Find the subgame perfect equilibrium. (b) Compare the equilibrium you found with the Nash equilibrium if the game was simultaneous (i.e., Cournot competition). Is the Nash equilibrium of the Cournot game also a Nash equilibrium of the sequential game? Why or why not?
One of the predictions of the oligopoly model is that: non-price competition is uncommon and price-cutting competition among rivals is common. prices tend to remain relatively stable despite short-run fluctuations in market demand. the firms' costs of production (raw material, labor, advertising) remain constant over time. only one buyer (monopsony) will result in the long run. MacBook Pro G Search or type URL * 23 3 41 5 6 7 8. Y U W E tab G s lock
Consider a Cournot oligopoly with three firms i = 1,2, 3. All firms have the same constant marginal cost c = 1. The inverse demand function of the market is given by P = 9-Q, where P is the market price, and Q = E1 9i is the aggregate output. 3 (a) Solve for the Nash equilibrium of the game including firm out- puts, market price, aggregate output, and firm profits (Hint: the NE is symmetric). (b) Now suppose these three firms play a 2-stage game. In stage 1, they produce capacities q1, 72 and 73, which are equal to the Nash equilibrium quantities of the Cournot game characterised by part (a). In stage 2, they simultaneously decide on their prices p1, p2 and p3. The marginal cost for each firm to sell up to capacity is 0. It is impossible to sell more than capacity. The residual demand for firm i is 9 – Pi - Eiti āj if pi > P; for all j # i if p; = Pj for all j # i if p; < P; for all j #i | 9-pi D; (pi, p-i) = 3 9 – p; (Note, here we assume that the efficient/parallel rationing ap-…
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An oligopolistic firm operating under Oligopoly faces the following demand curves for a price increase and a price decrease: P1= 40-2Q (Increase) P2=50-4Q (Decrease) a) Find the price and quantity at the kink b) What are the upper and lower bounds of the marginal revenue curve? c) What is the price elasticity for demand for a price increase? d) What is the price of demand for a price decrease?
The market demand curve for mineral water is given by P=20 - Q. If there are two firms that produce mineral water, each with a constant marginal cost of 8 per unit, fill in the entries for each of the four duopoly models indicated in the table. (In the Stackelberg model, assume that firm 1 is the leader.) Instructions: Round your answers to 1 decimal place. Model Shared monopoly Cournot Bertrand Stackelberg 21 4.5 92 4.5 01 + 0₂ P 11 1 ग 2 π 1+ 2
Question 1 Suppose the romaine lettuce industry is a Cournot duopoly with the following two firms: Amalgamated Romaine (a) and Best Romaine (b). The (inverse) market demand schedule is: p = 262 -0.5Q Amalgamated Romaine has the following cost structure: MCATC₁ = $6 Best Romaine has a different cost structure: MC₁ = ATC₁ = $8 Find the following in Cournot-Nash equilibrium. a. Output of Amalgamated Romaine = b. Output of Best Romaine = c. Cournot duopoly equilibrium price = $ units units 3 pts