Synergy Co. and Durham Co. are the only two firms in the TVs market.The 2 firms can collude and both charge higher prices.The table below shows the profits per unit they can hope to earn based on pricing strategies.However if Synergy Co. charged a high price for their TVs and Durham Co. charged a low price, Durham Co. would gaincomplete market share and earn $1470 profit per unit.However, if Durham Co. thought the same way and also charged a low price, both firms would end up earning $700 per unit -lower than what they could earn if they both charged a high price (i.e., $1100).Synergy Co. High priceLow priceDurham Co.High price$1100, $1100$1470, $0Low price$0, $1470$700, $700What would be the strategy that would maximize profit for both firms?○Both firms collude and charge a high priceOFirms compete: One firm charges a high price while the other charges a low priceOBoth firms collude and charge a low priceONone of these What is the dominant strategy in this game, most likely to take place?OBoth firms charge a high priceOne firm charges a high price while the other charges a low priceOBoth firms charge a low priceONone of theseCollusion is difficult to achieve and maintain becauseOBoth firms have an incentive to cheat and lower their priceOFirms do not wish to alienate their customers○Both firms can achieve higher profit if they competeONone of these

There are two firms in the above Game - Synergy Co. & Durham Co. Strategy Set of Firm 1 =…

Synergy Co. and Durham Co. are the only two firms in the TVs market. The 2 firms can collude and both charge higher prices. The table below shows the profits per unit they can hope to earn based on pricing strategies. However if Synergy Co. charged a high price for their TVs and Durham Co. charged a low price, Durham Co. would gain complete market share and earn $1470 profit per unit. However, if Durham Co. thought the same way and also charged a low price, both firms would end up earning $700 per unit - lower than what they could earn if they both charged a high price (i.e., $1100). Durham Co. High price Synergy Co. High price $1100, $1100 Low price $1470 $0 Low price $0, $1470 $700 $700

Synergy Co. and Durham Co. are the only two firms in the TVs market. The 2 firms can collude and both charge higher prices. The table below shows the profits per unit they can hope to earn based on pricing strategies. However if Synergy Co. charged a high price for their TVs and Durham Co. charged a low price, Durham Co. would gain complete market share and earn $1470 profit per unit. However, if Durham Co. thought the same way and also charged a low price, both firms would end up earning $700 per unit - lower than what they could earn if they both charged a high price (i.e., $1100). Durham Co. High price Synergy Co. High price $1100, $1100 Low price $1470 $0 Low price $0, $1470 $700 $700

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a duopolistic market in which the two identical firms compete by selecting their quantities. The inverse market demand is P(Q) = 210−Q and each firm has a marginal cost of $15 per unit. Assume that fixed costs are negligible for both firms. Cournot Model Determine the Nash-Cournot equilibrium for this market.(Enter your responses rounded to two decimal places.) Firm 1's quantity: q1= ? units. Firm 2's quantity: q2 = ? units. Market price: P= ? Stackelberg Model Determine the Nash-Stackelberg equilibrium for this market, assuming that Firm 1 is the Stackelberg leader. (Enter your responses rounded to two decimal places.) Firm 1's quantity: q1 = ? units Firm 2s quantity: q2 = ? units. Market price: P = ?
Consider a market with two firms managed by Harry and Vera. Under a cartel (both firms pick the high price), each firm earns a profit of $85. Under a duopoly (both firms pick the low price), each firm earns a profit of $70. If the two firms pick different prices, the high-price firm earns a profit of $25 and the low-price firm earns a profit of $100. This is depicted in the payoff matrix to the right. The outcome of the pricing game is Vera High Price Low Price O A. Harry and Vera both pick the high price. O B. Harry picks the low price and Vera picks the high price. OC. Harry picks the high price and Vera picks the low price. O D. Harry and Vera both pick the low price. Наrry $85 $100 High Price $85 $25 $25 $70 The outcome identified above is a Nash equilibrium because neither firm has an incentive to Low Price $100 $70 O A. pick the high price given that the other player is picking the low price. O B. pick the high price given that the other player is picking the high price. O C.…
Suppose that two clothing manufacturers, Lands’ End and L.L. Bean, are deciding what price to charge for very similar field coats. The cost of producing these coats is $100. The coats are very close substitutes, so customers flock to the seller that offers the lowest price. If both firms offer identical prices, each receives half the customers. For simplicity, assume that the two firms have the choice of pricing at prices of $103, $102, or $101. The profit each firm would earn at various prices (Lands’ Ends Profit, LL Bean’s Profit) is attached in the payoff matrix below: a.) What is the Nash equilibrium and expected profits to LL Bean and Lands’ End of this game? b.) Suppose this is a mixed strategy game in which LL Bean has a 25% percent chance of choosing a priceof $101, a 25% chance of choosing price of $102, and a 50% chance of choosing $103, while Lands End has a1/3 chance of choosing each strategy. What’s the expected payoff to LL Bean? c.) Suppose that in hopes of raising…
Please help with these two: 1. Consider a Duopoly model, in which two firms decide a quantity simultaneously. If they collude (setting the total quantity together), then each firm can earn (higher, or lower) profit than in the Cournot equilibrium. 2. Consider a collusion with two firms. The joint profit is maximized by setting quantity and price together. Each firm sells the agreed amount. However, believing that the other firm sells the agreed amount, there is always a temptation for the firm sell (more, or less) than the agreed amount.
The firms in a duopoly produce differentiated products. The inverse demand for Firm 1 is The inverse demand for Firm 2 is and P₁ = 52-9₁-0.592. Each firm has a marginal cost of m= $1 per unit. Solve for the Nash-Cournot equilibrium quantities. The Cournot equilibrium quantities are (Enter your responses rounded to two decimal places.) P₂ = 100-92-0.5q1₁. 91 = units 92 units. =
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Suppose that an oligopolistic is charging $21 per unit of output and selling 31 units each day. What is its daily total revenue? Also suppose that previously it had lowered its price from $21 to $19, rivals matched the price cut, and the firmâ€™s sales increased from 31 to 32 units. It also previously raised its price from $21 to $23, rivals ignored the price hike, and the firmâ€™s daily total revenue came in at $482. Which of the following is most logical to conclude? The firmâ€™s demand curve is (a) inelastic over the $21 to $23 price range, (b) elastic over the $19 to $21 price range, (c) a linear(straight) down sloping line, or (d) a curve with a kink in it?
Problem 5.1. The inverse market demand for printer paper is given by P = 400 – 2Q. There are two firms who compete to produce this paper, each with a marginal cost of production equal to c = 40 over a large range of output (ie, assume constant marginal cost). The two firms compete in quantities, in other words they each simultaneously choose a quantity to produce (Cournot competition). Derive the Cournot-Nash equilibrium of this game. Please write final answers in the boxes, showing work in blank areas. (a) The reaction function for each firm. 91 (92): 92 (91) (b) Optimal output q for each firm. 92 = р = = π1 = (c) Market price (from demand curve). (d) Firm profits. 92 = π2 =
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