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True or False: Coordinated effects are more likely when there are efficiency gains from the merger
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- In the Nash equilibrium of a Cournot game with two firms who have identical marginal costs, each firm chooses to produce half of the quantity that would be produced by a monopolist, given the same aggregate demand and marginal cost.(a) True. (b) False.Assume that we have an entry situation like that in the Judo Economics example. There is an incumbent firm (I) and a new entrant (E). Now we will look at the outcome if the entrant is at a disadvantage. The incumbent has constant marginal costs of production of $100, while marginal costs for the entrant are $120 per unit. There are 100 identical buyers who are willing to pay $200 for the incumbent’s product, but only $160 to buy from the entrant. Any consumer can buy from the incumbent, but only those targeted by the entrant can buy from the entrant. Those consumers targeted by the entrant can choose to buy from the incumbent or the entrant and will choose the lowest price (with the incumbent winning ties). At the first move of the game the entrant decides how many consumers (N) to target and sets a single price (P) to those targeted consumers. The incumbent then sets a single price for all 100 consumers, deciding to defend the market or accommodate the new entrant. Consumers then…THE PRISONERS' DILEMMA Consider the following simple model of a cocktail party. Alice and Bob are carrying on separate conversations at the party. Alice speaks at volume a and Bob speaks at volume b. The communication benefit to Alice is al(a + b) and the benefit to Bob is b/(a + b). The vocal-strain cost to Alice is ca and the cost to Bob is cb, where c is a parameter. Suppose that the players have two choices: speaking softly at volume 1, or speaking loudly at volume 4. This leads to the following game in strategic form, with Alice choosing the row and Bob choosing the column. a = 1 a = 4 b = 1 0.5-c, 0.5-c 0.8-4c, 0.2-c 0.0400 0.0500 0.0750 0.0800 0.1500 b = 4 0.2 c, 0.8-4c - 0.54c, 0.5-4c For which of the following values of c is this game a prisoners' dilemma? (Mark all values for which this is true.)
- suppose the campus of a university with 1,000 students lies along a street which is one mile long. There are two restaurants that sell pizza by the slice, and they are located at opposite ends of the campus street. Each restaurant can produce a slice of pizza for $1.00 (marginal cost) and the quality of the pizza from the two restaurants is identical. After classes, each student would like to buy one slice of pizza (as long as it costs less than $5.00), but they are evenly distributed along the university campus street and each needs to choose which direction to walk to get pizza. They have a constant disutility of having to walk such that they are willing to pay $2.00 per mile to avoid walking. (You can ignore the presence of other restaurants and assume that students choose between only these two.) 1. If these restaurants simultaneously set prices to maximize profits, what prices will each restaurant set in equilibrium? (You don’t need to derive the equilibrium prices here if you are…(1) Two firms (A and B) that produce timber products pollute a local forest with pesticides used to grow trees. Currently, firm A releases 100 pounds of pesticide waste into the forest per month, while firm B releases 140 pounds of pesticide waste into forest per month. The table below shows the cost of reducing pesticide waste by increments of 10 pounds for each firm. For each firm, reductions beyond 50 pounds would be virtually impossible to accomplish and expensive if it is to stay in business, because some pesticide must be used. Total cost of reducing Firm A pesticide waste by 10 pounds 20 pounds 30 pounds 40 pounds 50 pounds Firm B $6 $4 $18 $12 $36 $24 $60 $40 $90 $64 Suppose the government wants to reduce pesticide waste level to 180 pounds. That is, the government wants to reduce pesticide waste from its current monthly level to 180 pounds per month. To achieve this goal, the government decides to issue permits to pollute. A total of 18 permits are issued, where each permit…Suppose that two firms produce a particular (homogeneous) product. The inverse demand function for the product is P = 100 -Q. The firms have marginal cost equal to 10. (a) Derive the Cournot Nash equilibrium quantities, and the corresponding price and profits. Show all work. (b) Suppose that the current price is the Cournot price you derived in part (a). Using the hypothetical monopolist test and assuming a 5% threshold for the test, does the good in question represent an antitrust market? Show all work and explain your answer. There are different ways to answer this question and any correct approach will be accepted. (c) Suppose more generally that marginal cost is equal to c. For what values of c will this product represent an antitrust market? Show your work and explain your answer. Maximum size for new files: 400MB Files
- I was hoping I could have some help on parts c-e of this problem I’m getting a little stuck on making sure my values are correct given this this is a cournot duopoly model.For the entry deterrence example we discussed today, [Market demand Q(p) = 100 p. the incumbent firm's marginal cost MC = 20, the entrant's marginal cost MC = 20] (A) The incumbent firm's strategy if F = 300 will be entry deterrence. (F is the Entrant's fixed entry cost.) (B) If F = 300 entry deterrence is socially optimal. * (A) is true; (B) is false (A) is false; (B) is true Both (A) and (B) are false Both (A) and (B) are trueTwo Bertrand competitors sell identical products. Each firm is located at either end of a one-mile street. Both firms have marginal costs equal to 10 per unit and no fixed costs. There are 1000 consumers located evenly along the one-mile street who incur (there-and-back) travel costs of 5 per mile. Consumers share a common valuation of 20 for the product and purchase the product so long as this value exceeds the effective price (i.e. price plus travel costs). Suppose the firms set prices sequentially (with firm 1 moving first), what is the combined total profit of both firms?
- Three firms are bidding for the rights to provide cable television services. The demand for cable television is given by the equation P=100-Q. Firm 1 has an average cost of AC1 = 10, Firm 2 has an average cost of AC2 = 20, and Firm 3 has an average cost of AC3 = 30. If the rights are awarded using an English auction, approximately what is the resulting price and quantity of services provided? (A). P= 10; Q = 90. (B). P = 20; Q = 80. (C). P = 30; Q = 70. (D). P = 20; Q = 90. (E). P = 10; Q = 80.Axon pharma specializes and is the market leader in vaccines. They decide to acquire another company that specializes in cancer drugs. This is an example of: Vertical merger Horizontal merger Diagonal merger None of the above