Suppose there are two firms operating in the same market and compete over prices. the firmssell a differentiated product and their demand is given byFirm 1's demand: -1.5 p,+p,+273Firm 2's demand: 0.5 p,-1.5 p2+293The firms' reaction function will be of the form p,=A¬+a¡ P2 and p2=A2+a2P1where A1=and a1=|A2=and a2=Are pricesOstrategic complementsOstrategic substitutesWhat are the equilibrium prices in this marketP1=and p2=What are the quantities demanded from each firmq1=and q2=What are the profits for each firmT1=and 12=|

q1=-1.5p1+p2+273q2=0.5p1-1.5p2+293TR1=p1q1 =p1(-1.5p1+p2+273)…

Suppose there are two firms operating in the same market and compete over prices. the firms sell a differentiated product and their demand is given by Firm 1's demand: -1.5 p,+p2+273 Firm 2's demand: 0.5 p,-1.5 p2+293 The firms' reaction function will be of the form p1=A1+a, p2 and p2=A2+a2P1 where A1= and a1= A2= and a2= Are prices Ostrategic complements Ostrategic substitutes What are the equilibrium prices in this market P1= and p2= What are the quantities demanded from each firm and q2= What are the profits for each firm TT= and t2=

Suppose there are two firms operating in the same market and compete over prices. the firms sell a differentiated product and their demand is given by Firm 1's demand: -1.5 p,+p2+273 Firm 2's demand: 0.5 p,-1.5 p2+293 The firms' reaction function will be of the form p1=A1+a, p2 and p2=A2+a2P1 where A1= and a1= A2= and a2= Are prices Ostrategic complements Ostrategic substitutes What are the equilibrium prices in this market P1= and p2= What are the quantities demanded from each firm and q2= What are the profits for each firm TT= and t2=

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the iceberg lettuce industry is a Cournot duopoly with two firms: Xtra Leafy (a) and Yummy Farms (y). Xtra Leafy produces q units of output and Yummy Farms produces qy units of output. Aggregate market output is Q = x + y. The (inverse) market demand schedule is: p = 176 - 2Q Both firms have identical cost structures: MC = MC₁ = ATC₂ = ATC₁ = $12 Find Xtra Leafy's Cournot reaction function of the form: 9x = a + bay Where "a" is the reaction function's intercept and "b" is its slope. Note: Please review the formatting instructions above. If any value is negative, be sure to include its negative sign. a. a= b. b = Hint: One of your answers will be negative. Think about why.
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Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity q1₁. Firms 2 and 3 observe Firm 1's choice, and then proceed to simultaneously choose 92 and 93, respectively. Market demand is given by p(Q) = 100 – · Q, and Q = 9₁ +92 +93. Firm 1's costs are c₁ (9₁) = 591, firm 2's costs are c₂ (92) = 492 and firm 3's costs are C3 (93) = 493. C2 Starting from the end of the game, you can express Firm 2's best response function in terms of 9₁ and 93, and you can similarly express Firm 3's best response function in terms of 9₁ and 92. Using these, answer the following questions. If rounding is needed, write your answers to 3 decimal places. a) If Firm 1 chooses q₁ = 3, what quantity will Firm 2 choose? b) If Firm 1 chooses 9₁ = 100, what quantity will Firm 2 choose? c) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) In the subgame perfect Nash equilibrium of this game, firm 2 and firm 3 each produce what quantity?
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Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=200-QA - QB where QA and QB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCA = 1,500 + 55QA + Q₁² Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). In such a case, Company A will produce units and sell at Similarly, Company B will produce At the optimum output levels, Company A earns total profits of $ total industry profits are $ At the optimum output levels, the marginal cost of Company A is $ Cournot Equilibrium Company A Company B Total Industry Selling price The following table shows the long-run equilibrium if the firms act independently, as in the Cournot model (i.e., each firm assumes that the other firm's output will not change). Total industry output Price Output…
Consider a market with demand P(Q) = 39-3Q in which two firms compete. Firm 1 faces TC1(Q) = 18Q and firm 2 faces TC2(Q) = 9Q. Suppose that firm 1 chooses their quantity first, then firm 2 sees that quantity, and then firm 2 sets their quantity (Stackelberg duopoly). (a) Find the reaction function for firm 2 (b) What is the marginal revenue for firm 1 (given that they know that firm 2 will best respond)? (c) Find the Stackelberg equilibrium (d) Determine profits for each firm and consumer surplus. (e) Which firm is better off?