Problem 2: Yellow croakers Every day, two fish farms, A and B, bring their fresh yellow croakers to two fish markets, one in Puxi and the other in Pudong. At 5 am, each firm loads a truck with sufficiently many croakers, surely more than they will want to place on the markets. Every kilo of croakers that is not placed on either market is then transported to a frozen fish company that buys it at price 40. This is the marginal cost of leaving each kilo of croakers at a market! At each market, the demand for croakers is P = 100-Q, where Q is measured in kilos. a) Suppose that firm A's truck goes first to Pudong and firm B's truck goes first to Puxi. In this way, in each market, the firm that arrives second can observe how many kilos of croakers were left by the firm that arrives first. How much will each firm place on each market? b) Suppose now instead that both trucks go first to Pudong and then to Puxi, so in each market the two firms have to decide how many kilos of croakers to leave before observing how much the other left. How much will each firm leave on each market? c) Suppose now instead that the two firms collude to serve one market each: firm A only goes to Puxi and firm B only goes to Pudong. How much will they sell in their respective market? (Again, just solve the problem for one.)
Problem 2: Yellow croakers Every day, two fish farms, A and B, bring their fresh yellow croakers to two fish markets, one in Puxi and the other in Pudong. At 5 am, each firm loads a truck with sufficiently many croakers, surely more than they will want to place on the markets. Every kilo of croakers that is not placed on either market is then transported to a frozen fish company that buys it at price 40. This is the marginal cost of leaving each kilo of croakers at a market! At each market, the demand for croakers is P = 100-Q, where Q is measured in kilos. a) Suppose that firm A's truck goes first to Pudong and firm B's truck goes first to Puxi. In this way, in each market, the firm that arrives second can observe how many kilos of croakers were left by the firm that arrives first. How much will each firm place on each market? b) Suppose now instead that both trucks go first to Pudong and then to Puxi, so in each market the two firms have to decide how many kilos of croakers to leave before observing how much the other left. How much will each firm leave on each market? c) Suppose now instead that the two firms collude to serve one market each: firm A only goes to Puxi and firm B only goes to Pudong. How much will they sell in their respective market? (Again, just solve the problem for one.)
Chapter1: Making Economics Decisions
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Transcribed Image Text:Problem 2: Yellow croakers
Every day, two fish farms, A and B, bring their fresh yellow croakers to two fish markets, one in Puxi
and the other in Pudong. At 5 am, each firm loads a truck with sufficiently many croakers, surely more than
they will want to place on the markets. Every kilo of croakers that is not placed on either market is then
transported to a frozen fish company that buys it at price 40. This is the marginal cost of leaving each
kilo of croakers at a market!
At each market, the demand for croakers is P = 100-Q, where is measured in kilos.
a) Suppose that firm A's truck goes first to Pudong and firm B's truck goes first to Puxi. In this way, in
each market, the firm that arrives second can observe how many kilos of croakers were left by the firm that
arrives first. How much will each firm place on each market?
b) Suppose now instead that both trucks go first to Pudong and then to Puxi, so in each market the two
firms have to decide how many kilos of croakers to leave before observing how much the other left. How
much will each firm leave on each market?
c) Suppose now instead that the two firms collude to serve one market each: firm A only goes to Puxi
and firm B only goes to Pudong. How much will they sell in their respective market? (Again, just solve the
problem for one.)
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