PROBLEM (3) Consider the differentiated goods Bertrand price competition model where firms A and B produce similar goods and sell them at på and pв. The demand for each firm's product is given by qA = 400 - 3pA - 2 pв and qв = 400 - 3p³ - 2pA, and MCA(qA) = ATCA(q) = 40 and MCB(qB) = ATCB(qB) = 40. (a) Are the two goods substitutes or complements? Do the firms want to charge higher prices or lower prices, the higher the opponent's price? (Is the best response price increasing (or decreasing, or neither) in the opponent's price?) Calculate the Bertrand equilibrium prices. (b) Now suppose the firms -instead of competing to maximize their own individual profits- decide to "collude" and charge prices to maximize their joint profits (sum of their profits). What would be each firm's optimal price? Are these prices greater/smaller/the same compared to the prices in (a)?

PROBLEM (3) Consider the differentiated goods Bertrand price competition model where firms A and B produce similar goods and sell them at på and pв. The demand for each firm's product is given by qA = 400 - 3pA - 2 pв and qв = 400 - 3p³ - 2pA, and MCA(qA) = ATCA(q) = 40 and MCB(qB) = ATCB(qB) = 40. (a) Are the two goods substitutes or complements? Do the firms want to charge higher prices or lower prices, the higher the opponent's price? (Is the best response price increasing (or decreasing, or neither) in the opponent's price?) Calculate the Bertrand equilibrium prices. (b) Now suppose the firms -instead of competing to maximize their own individual profits- decide to "collude" and charge prices to maximize their joint profits (sum of their profits). What would be each firm's optimal price? Are these prices greater/smaller/the same compared to the prices in (a)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: This does not solve for the Present Worth of Costs

A: Two design alternatives: 1) Steel Girder 2) Concrete Girder Initial cost of Steel Girder = $2.25…

Q: 1. What is the ANNUAL premium for an individual who is 21 years old? 2. Between what two ages does…

A: Note: “Since you have posted a question with multiple sub-parts, we will solve the first three…

Q: 1. Compute the linear cost function, relating total overhead costs to physician contact hours, using…

A: “Since you have posted multiple questions, we will provide the solution only to the first question…

Q: Suppose that in response to huge job losses in the U.S. textile industry, Congress imposes a 100…

A: Due to huge job losses in the U.S. textile industry, congress imposes a 100 percent tariff on…

Q: References Mailings Review View Help In a one-shot game, if you advertise and your rival advertises,…

A: a) From the given information ,we get the payoffs of the game as shown below: Your rival Your…

Q: hat i nd Ho rovid xplan astict kes elasti

A: The elasticity is the percentage change concept and not the absolute change concept between the…

Q: what will happen if two assets are earning the same exoected return, but one is risker than the…

A: You are presented with two assets in your investment portfolio.Both of these assets are expected to…

Q: Merchandising Mathematics The rate of sale for a patio furniture set is estimated at seven per…

A: GIVEN DATA The rate of sale for a patio furniture set is estimated at seven per week. The buyer…

Q: Habit buying can be beneficial to consumers because (a) it result in paying lower prices for most…

A: The buying behavior of any customer depends on their habit , variety seeking, extended decision…

Q: 1.Factory does not install scrubber,Farmer uses south field Crop Damage ($)= 120 Farmer cost ($)=0…

A: Willingness to pay (WTP) is a concept used in economics and decision-making to measure the maximum…

Q: qwertyuioopoytttrt

A: Unfortunately, "qwertyuioopoytttrt" doesn't seem to be a question with a specific answer or problem…

Q: SERNAME: student ASSWORD: Broward1

A: Introduction The percentage of the population living in poverty. The difference between the poverty…

Q: is a performance measurement and management document that records the ratings from a performance…

A: The company keeps record of the performance of the employees so that they can evaluate it in the…

Q: Your workforce in the sales department consist of 30 workers. 10 are baby boomers born between 1945…

A: The workforce is the work pool in employment. It is frequently used to depict those working for a…

Q: The Pear company produces and sells pPhones. Their production costs are $290000 plus $180 for each…

A: Break-even is when total revenue equals total cost.

Q: The following information has been gathered on the costs and effectiveness of the two treatments, A…

A: Cost-benefit analysis is a decision-making tool that evaluates the potential costs and benefits of a…

Q: A retailer bought several pairs of Jean's for $75,000. He sold all but 30 pairs got 86400 making a…

A: Let, retailer bought x pairs of jeans at price $y for each pair. Total cost: xy = $75,000 Since he…

Q: Do not use chatgpt

A: Detailed explanation: During Operation Enduring Freedom, which began in response to the terrorist…

Q: PLS HELP ASAP ON BOTH

A: False. Descriptions of products and services should typically address the features, benefits, and…

Q: I need typing clear urjent no chatgpt use i will give 5 upvotes

A: Step 1: First convert mg into grams. We know that 1 mg = 0.001 grams So, 200 mg =200(0.001) =0.2…

Q: 1. Suppose you are considering to make a decent holiday dinner. In this year, to be creative, you…

A: Given The total utility of Salmon is describe by the function U1400Q .......(1) The total…

Q: When I entered my answer in my online math assigment it said it was wrong

A: We use this formula to solve the above problem: A = P(1 + r)t where A is the amount that you get…

Q: he number of families covered is million and the premium is per family per year.

A: The graph obtained from the prevoius solution is

Question

Please answer each part with a step by step solution and do not use ChatGPT or other AI tools. Also, do not copy answers from other websites.

**Problem (3): Differentiated Goods Bertrand Price Competition Model**

Consider the differentiated goods Bertrand price competition model where firms A and B produce similar goods and sell them at prices $ p_A $ and $ p_B $. The demand for each firm's product is described by the equations:

- $ q_A = 400 - 3p_A - 2p_B $
- $ q_B = 400 - 3p_B - 2p_A $

Additionally, the marginal cost (MC) and average total cost (ATC) for both firms are given as:

- $ MC_A(q_A) = ATC_A(q_A) = 40 $
- $ MC_B(q_B) = ATC_B(q_B) = 40 $

**(a)** Are the two goods substitutes or complements?

- Do the firms want to charge higher or lower prices the higher the opponent’s price?
- Is the best response price increasing (or decreasing, or neither) in the opponent's price?
- Calculate the Bertrand equilibrium prices.

**(b)** Now suppose the firms, instead of competing to maximize their own individual profits, decide to "collude" and set prices to maximize their joint profits (the sum of their profits).

- What would be each firm’s optimal price?
- Are these prices greater, smaller, or the same compared to the prices in (a)?

**Explanation:**

1. **Substitutes or Complements:**
- Determine whether the goods are substitutes or complements by examining the relationship between the products' demands and prices.

2. **Best Response Pricing:**
- Analyze if the reaction functions are increasing or decreasing based on the opponent's pricing strategies.

3. **Bertrand Equilibrium Prices:**
- Solve the equations to find the equilibrium prices where both firms maximize their profit given the price of the other firm.

4. **Collusion Strategy:**
- Study the effect of collusion on profit maximization and how it changes the optimal pricing strategy compared to non-collusive behavior.

Definition Definition Structural system an enterprise uses to collect, store, report, retrieve, and process financial data. Accounting information systems are used by business analysts, auditors, accountants, and consultants for accurate and efficient access to financial data.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Define oligopoly

VIEW

Step 2: Explain if goods are complements or substitutes

VIEW

Step 3: Find the optimal price and profits

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

The following are the P/E ratios (price of stock divided by projected earnings per share) for 20 banks. 50, 19, 22, 21, 25, 18, 31, 21, 19, 14, 15, 18, 17, 34, 29, 23, 14, 18, 22, 22 Send data to calculator Find 20" and 75" percentiles for these ratios. (a) The 20th percentile: (b) The 75th percentile:| Continue Cip 40 4- %23 %24 3. 6. 7. R. 00 %24
What benefits are their in operating a business to consumer online business model for consumers and the owner?
Whats a problem customers face with LCD Panels Battery issues?
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.
Bernardo Beefmaster has 50 cull cows that average 1100 Ibs and he purchased them for $60/cwt. He fed the cows for 55 days and sold them at 1260 Ibs for $65/cwt. The cows averaged about 30 lbs of feed per day, and cost $7/cwt. Calculate the average daily gain, feed efficiency (feed:gain), feed only cost of gain, breakeven per pound and total, and the total margin. WHAT IS THE BREAKEVEN VALUE PER POUND?
Typed plz and asap please provide a quality solution for better ratings and take care of plagiarism
which quote best represents a person performing a cost-benfit analysis?