Q4. Consider a Cournot competition model with two firms, 1 and 2. They produce identical goods in the same market with demand function P = 120-5Q, with Q=q1+q2. Furthermore, their production process generates pollution to the environment, which increases their cost of production. Their cost functions are given by C₁(91, 92) = 10 q1²+5qz C₂(91, 92) = 1092 +591 (a) Calculate their equilibrium quantities and prices for both firms. (b) Consider they collude and form a cartel, that is they perform together as a monopoly and maximize their total profits. Calculate new equilibrium quantities and prices.
Q4. Consider a Cournot competition model with two firms, 1 and 2. They produce identical goods in the same market with demand function P = 120-5Q, with Q=q1+q2. Furthermore, their production process generates pollution to the environment, which increases their cost of production. Their cost functions are given by C₁(91, 92) = 10 q1²+5qz C₂(91, 92) = 1092 +591 (a) Calculate their equilibrium quantities and prices for both firms. (b) Consider they collude and form a cartel, that is they perform together as a monopoly and maximize their total profits. Calculate new equilibrium quantities and prices.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please help with #4- A and B
Transcribed Image Text:Q3. Suppose the following dynamic game:
(-1,0)
A
Player 1
Player 2
(1,0)
H
H
a. How many subgames in this game?
b. Find all pure subgame perfect Nash equilibria.
Player 1
ΤΗ
(1,-1) (-1, 1) (-1, 1) (1,-1)
Q4. Consider a Cournot competition model with two firms, 1 and 2. They produce identical
goods in the same market with demand function P = 120-5Q, with Q=q1+q2. Furthermore,
their production process generates pollution to the environment, which increases their cost of
production. Their cost functions are given by
C₁(91, 92) = 10 q₁² +592
C₂(91, 92) = 1092 +591
(a) Calculate their equilibrium quantities and prices for both firms.
(b) Consider they collude and form a cartel, that is they perform together as a monopoly and
maximize their total profits. Calculate new equilibrium quantities and prices.
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