In the initial Cournot oligopoly equilibrium, both firms have constant marginal costs, m, and no fixed costs, and there is a barrier to entry. Determine what happens to the best-response function of firms if both firms now face a fixed cost of F

In the initial Cournot oligopoly equilibrium, both firms have constant marginal costs, m, and no fixed costs, and there is a barrier to entry. Determine what happens to the best-response function of firms if both firms now face a fixed cost of F

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

See similar textbooks

Similar questions

Consider the following normal form representation of the standard competition between firm A and firm B. Each firm can choose either standard A or standard B. Their payoffs are given as follows: Firm B A В A Firm A В 1 1 3 1 (1) (10 points) What's Nash equilibrium (NE) in this game? If there are more than one, find them all. But there is no NE, state that there is no NE. (2) (10 points) If you find a NE (or multiple Nash equilibria), is it (or are they) Pareto efficient?
Two firms in a Cournat oligpoly each have the best response function, such that the optimal quantity for each individual firm to produce must satisfy the equation: Q-27-Q/2 What quantity Q will each firm produce in the market? Type your answer...
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?
If firm 1 and firm 2 are the oligopolistic firms in bottled spring water production in Nomansland. The market demand is given by ? = 5000 −20?, Qd is the number of kilolitres demanded per month while P is the price of kilolitres of bottled water. The marginal cost of a kilolitre of bottled water is R10.How do I Find the Cournot equilibrium quantities and price? and how do I Find the Cournot profits and the monopolist profits?
1. Best responses in a Cournot Oligopoly Firm A and Firm B sell identical goods Total market demand for the good is: The inverse demand function is therefore 1 P(QM) = 780 -Q=780 -0.02222QM 45 QM is total market production (i.e., combined production of firm's A and B. That is: Q(P) = 35, 100- 45P 2M = A +QB As a result, the inverse demand curve for each firm is: P(QA, QB) = 780- -1/32₁-752 45 Unlike the example in class, the two firms have different costs. = 4000A TCA (QA) TCB (QB) = 260QB = 780 -0.022220A -0.02222QB a. Using the demand function and the cost functions above, what is firm A's profit function. b. Using the profit function above and assuming that firm B produces Qg, calculate what firm A's best response is to firm B’s decision to produce QB- Note: Firm A's best response should be a function of B
In a Cournot duopoly model, the market demand curve is given by P 100 - yI - y2- !! where y, is the amount of output firm 1 produces and y2 is firm 2's level of output. The cost function of firm 1 is c(y1) 75 +8y1. The cost function of firm 2 is c(y2) = 100 +12y2. %3D The reaction function of firm 1 is y1 = -0.5y2- The reaction function of firm 2 is y2 = -0.5y1- In the Cournot equilibrium, firm 2 produces units of output and makes a producer surplus of $
Suppose two firms, Firm A and Firm B, are competing by setting quantities (Cournot competition). Firm A has a constant marginal cost of $10 per unit; Firm B has a constant marginal cost of $15 per unit. Assume fixed costs are equal to 0 for both firms. Hint: since fixed costs are zero and the marginal cost is constant, MC = AC. The two firms choose between producing 50 units or 100 units. If the total output is 100 units, the price is $20 per unit; if total output is 150 units, the price is $15 per unit; if total output is 200 units, the price is $10 per unit. Based on the information provided, fill in the firms’ profits in the payoff matrix below with Firm A choosing the row and Firm B choosing the column. QB=100 QB=50 QA=100 , , QA=50 , , The resulting equilibrium is for Firm A to produce ____ (50 or 100)units and Firm B to produce_____ (50 or 100) units.
There are two firms that are producing identical goods in a market characterized by the inverse demand curve P = 60 - 2Q, where Q is the sum of Firm 1's and Firm 2's output, q₁+q2. Each firm's marginal cost is constant at 12, and fixed cost are 0. Answer the following question, assuming that the firms are Cournot competitors. a. Calculate each firm's reaction function and illustrate them graphically (15 points) b. How much output does each firm produce? (12.5 points) c. What is the market price? (7.5 points) d. How much profit does each firm earn? What is the industry profit? (10 points)
What is the homogeneous-good duopoly Cournot equilibrium if the market demand function is Q= 1,800 - 1,000p. and each firm's marginal cost is $0.28 per unit? The Cournot-Nash equilibrium occurs where q, equals and 92 equals (Enter numenic responses using real numbers rounded to two decimai places.) Furthermore, the equilibrium occurs at a price of $ (Round your answer to the nearest penny.)
Solve all questions compulsory..
Consider a market in which there are two firms: A and B. Each firm produces a differentiated product and chooses its price. Assume that each firm can set price equal to $60 or $70. The payoffs associated with each set of prices are shown. If the firms choose price simultaneously, then the Nash equilibrium price for firm A is chooses price first and can commit to that price, then firm A will set its price equal to If firm A ○ A. $70; $60 B. $70; $70 ○ C. $60; $70 ○ D. $60; $60 Q Firm B's Price ✓ $60 $70 $1800 $1650 $60 $1800 $2250 Firm A's Price $2250 $2200 $70 $1650 $2200
Consider a Bertrand oligopoly where two firms (Firms 1 and 2) sell goods that are imperfectsubstitutes and compete by choosing prices simultaneously. Their market demands areq!= 1,200 − 3/2p!+ 3/2p", q"= 800 − 2p"+ 1/2p!For simplicity, assume the marginal cost is zero for both firms (MC!= MC"= 0). Find the bestresponse curve of each firm. Which of the following alternatives is correct?(a) Firm 1’s best response curve is p!= 400 + 0.5p"(b) Firm 2’s best response curve is p"= 400 + 0.5p!(c) Firm 1’s best response curve is q!= 45 − 0.5q"(d) Firm 2’s best response curve is q"= 200 + 0.8p! Then, find the optimal price and quantity of each firm.Hint: Start by finding the Nash equilibrium, that is, the combination of mutual best responses.Which of the following alternatives is correct?(a) For firm 1, p!= $1,600/3 and q!= 800/3(b) For firm 1, p!= $800 and q!= 1,600/3(c) For firm 2, p"= $800 3⁄ and q"= 1,600/3(d) For firm 2, p"= $1,600 and q"= 800 key: !=1 "=2