Now consider the same industry but assume that two firms with the same cost function c(qi) = 2 * qi for i = {1,2} are active in this market. What is the price that realizes when they set prices in a simultanous move game (ie they play Bertrand). firm is instead Assume now that the cost of the second c(9₂2) = 5 * 92 What is the equilibrium price if they again play Bertrand? (round to the nearest whole number)

Now consider the same industry but assume that two firms with the same cost function c(qi) = 2 * qi for i = {1,2} are active in this market. What is the price that realizes when they set prices in a simultanous move game (ie they play Bertrand). firm is instead Assume now that the cost of the second c(9₂2) = 5 * 92 What is the equilibrium price if they again play Bertrand? (round to the nearest whole number)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.3P

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usiness EconomicsQ&A LibraryTwo firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in the industry that manufacture this product. Their marginal cost (MC) is equal to their average cost (AC) and it is constant at MC = AC = X, for both firms. Market demand is given as Q = Y – 2P (where P = price and Q = quantity). Select any value for X between [21 – 69] and any value for Y between [501 – 999]. Using this information, calculate the Industry Price, Industry Output, Industry Profit, Consumer Surplus and Deadweight Loss under each of the following models: (a) Cournot Model Two firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in…
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1. Two firms (A and B) play a competition game (i.e. Cournot) in which they can choose any Qi from 0 to ¥. The firms have the same cost functions C(Qi) = 10Qi + 0.5Qi2, and thus MCi = 10 + Qi. They face a market demand curve of P = 220 – (QA + QB). a. Assume firm A chooses quantity first. Frim B observes this choice and then chooses its own quantity. What is Frim B's profit as a function of QA and QB? b. Firm B has MRB = 220 – 2QB – QA. What is firm B’s best response to an arbitrary QA selected by firm A? c. Given that firm A expects firm B’s best response, what is firm A’s profit as a function of QA? (Hint: the only unknown variable in the profit function should be QA) d. Firm A has MRA = 150 – 4QA/3. What are the equilibrium QA and QB selected in this game? e. What is the equilibrium price, and how much profit does each firm collect?
Two firms produce identical products at zero cost, and theycompete by setting prices. If each firm charges a low price,then both firms earn profits of zero. If each firm charges ahigh price, then each firm earns profits of £30. If one firmcharges a high price and the other firm charges a low price,the firm that charges the lower price earns profits of £50, andthe firm charging the higher price earns profits of zero. (a) Which oligopoly model best describes this situation?(b) Write this game in normal form.(c) Suppose the game is infinitely repeated. Can theplayers sustain the "collusive outcome" as a Nashequilibrium if the interest rate is 50 percent? Explain. Please answer the a, b and c parts.
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Let ci be the constant marginal and average cost for firm i (so that firms may have different marginal costs). Suppose demand is given by P=1-Q. Calculate the Nash equilibrium quantities assuming there are two firms in a Cournot market. Also compute market output, market price, firm profits, industry prof- its, consumer surplus, and total welfare. Represent the Nash equilibrium on a best-response function diagram. Show how a reduction in firm 1’s cost would change the equilibrium. Draw a representative isoprofit for firm 1.
2 clothing manufacturers, LE and LL B, are deciding what price to charge for very similar field coats. Cost of producing these coats is $100. The coats are very close substitutes, so customers swarm to the seller that offers the lowest price. If both firms offer the same prices, each receives half of the customers. Assume the two firms have the choice of pricing at prices of $103, $102, or $101. The profit each firm would earn at various prices is shown in the payoff matrix below $103 ($150, $150) ($0, $200) ($0, $120) Lands' End $102 ($200, $0) ($100, $100) ($0, $120) $101. ($120, $0) ($120, $0) ($50, $50) What is the Nash equilibrium and expected profits to LLB and LE of this game? If this was a mixed strategy game in which LLB has a 25% percent chance of choosing a price of $101, a 25% chance of choosing price of $102, and a 50% chance of choosing $103, while LE has a1/3 chance of…
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2. An industry contains two firms that have identical cost functions C(q)=10+2q. The inverse demand function for the market is P=50-2Q where Q is the total industry output. Assuming the firms compete in quantities: Find the firms' best response functions. b. Solve for the Cournot Nash Equilibrium of the game. What is the total industry output in equilibrium? What is the equilibrium price? с. i. If both firms could collude, what would the industry output and price be? Suppose they decide that each firm produces half of the industry output found in part (i). Is this agreement self-enforcing? Explain. ii. a.
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