You are one of two identical firms producing homogeneous good. (a) If you have an option of announcing your output first (before your rival does so), would it be an advantage for you? [yes there is an advantage, no there is no advantage] (b) What if you have an option of announcing your price first? [yes there is an advantage, no there is no advantage

You are one of two identical firms producing homogeneous good. (a) If you have an option of announcing your output first (before your rival does so), would it be an advantage for you? [yes there is an advantage, no there is no advantage] (b) What if you have an option of announcing your price first? [yes there is an advantage, no there is no advantage

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1E

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Suppose there are only two gas stations in the remote town of Nome, Alaska and they are competitors. If one of them goes out of business, what will happen to the demand curve for the remaining gas station? In addition, what do you think will happen to prices? The graph below shows a demand for gasoline, with the price of gas and the sales of gas shown below on the graph. P P1 14 22 P2 32 D2 D1 Q1 Q2 Q3 The demand curve will pivot from D1 to D2 and prices will rise as demand becomes more inelastic. The demand will shift to the left, indicating lower demand when there are fewer stations. The demand curve will not change since everyone needs gas no matter what the price. The demand curve will pivot from D2 to D1 and prices will rise as demand becomes more inelastic. 00
Question 3 The inverse market demand for fax paper is given by P=100-Q. There are two firms who produce fax paper. Firm 1 has al cost of production of C₁= 15*Q₁ and firm 2 has a cost of production of C₂=20*Q₂. 1) Suppose firm 1 and firm 2 compute simultaneously in quantities. What are the Cournot quantities and prices? What are the profits of firm 1 and 2? 2) Suppose firm 1 and firm 2 compete simultaneously in prices. What are the Bertrand quantities and prices? What are the profits of firm 1 and 2? 3) Suppose that firm play a Stackelberg game. First firm 1 sets the quantity in t=1, then, knowing which quantity firm 1 has set, firm 2 chooses the quantity in t=2. What are the Stackelberg quantities and prices? What are the profits od firm 1 and 2? Compared to part a) which firm benefits and which firm loses?
In some industries, securing the adoption of an industry standard that is favourable to one’s own product is an enormous advantage. It can involve marketing efforts that grow more productive the larger the product’s market share. Microsoft’s Windows is an excellent example.2 The more customers adopt Windows, the more applications are introduced by independent software developers, and the more applications that are introduced the greater the chance for further adoptions. With other products the market can quickly exhibit diminishing returns to promotional expenditure, as it becomes saturated. However, with the adoption of new industry standards, or a new technology, increasing returns can persist.3 Microsoft is therefore willing to spend huge amounts on promotion and marketing to gain this advantage and dominate the industry. Many would claim that this is a restrictive practice, and that this has justified the recent anti-trust suit against the company. The competitive aspects of this…
Question 3 Assume we have a market with only two companies in it, Company X and Company Y. Now suppose that both companies have to choose one of two potential strategies for pricing their products: setting a low price or setting a high price. The table below shows the expected profits for each company under each pricing scenario. Assume both companies are in competition with each other and seek to maximize their profits. Under these conditions, how much profit should we expect both companies to earn? Company Y Provide your answer below: High Price Low Price High Price Profit for Company Y: $12, 975,000 Profit for Company X: $12, 975,000 Profit for Company Y: $16, 218,000 Profit for Company X: $1,946, 000 Company X Low Price Profit for Company Y: $1,946, 000 Profit for Company X: $16, 218,000 Profit for Company Y: $6,487,000 Profit for Company X: $6,487,000
The inverse market demand for fax paper is given by P=100-Q. There are two firms who produce fax paper. Firm 1 has a cost of production of C1= 15*Q1 and firm 2 has a cost of production of C2=20*Q2 a) Suppose firm 1 and firm 2 compute simultaneously in quantities. What are the Cournot quantities and prices?What are the profits of firm 1 and 2?b) Suppose firm 1 and firm 2 compete simultaneously in prices. What are the Bertrand quantities and prices?What are the profits of firm 1 and 2?
Please answer the blank spaces below: 1. At the Nash equilibrium, Local Oil earns a profit of $______ m, and Oil Giant earns a profit of $_______ m. [enter the numbers only]
1 Consider two identical firms with a unit cost of production of $10 and a market demand of p= 60-y. (a) What is firm 1’s optimal output level as a function of firm 2’s output? (b) What is firm 2’s optimal output level as a function of firm 1’s output? (c) What is the Cournot equilibrium output level for these firms? (d) What is the Cournot equilibrium price level? Show your work step by step.
Two firms face the same inverse demand curve: P= 370– q, – 92 . Both firms have the same constant marginal cost: MC = 10. (a) %3D if both firms choose their output levels simultaneously, how much profits and consumer surplus will be earned in equilibrium? (b) Firm 1 is offered the following deal: by paying Z it can either (i) acquire a new technology that lowers its marginal cost to zero or (ii) have to opportunity to produce output before firm 2. Which option would it take and what is the maximum Z it would be willing to pay?
Exercise A.9 In a market only two firms produce a homogeneous good. You work on one of them and are tasked with drawing up the production strategy for the coming year. The two companies in the market have the same information and the objective of both is the maximization of their profit. You know: the inverse market demand curve of the good: P(Q)=200-2Q where Q = q₁ + q₂ , the function that represents the costs of your company and the rival company: C(qᵢ) = 20qᵢ (for i=1, 2), and the data in the following table, with the optimal decisions according to the different types of competition:C(qᵢ) = 20qᵢ and the data in the following table, with the optimal decisions according to the different types of competition: q1 q2 P Bertrand 45 45 20 Cournot 30 30 80 Collusion 22,5 22,5 110 a) What is more in your company's interest to compete or cooperate with the rival company? Keep in mind that explicit collusion agreements are illegal, so each…
1. The market (inverse) demand function for a homogeneous good is P(Q) = 10 - Q. There are two firms: firm 1 has a constant marginal cost of 2 for producing each unit of the good, and firm 2 has a constant marginal cost of 1. The two firms compete by setting their quantities of production, and the price of the good is determined by the market demand function given the total quantity. a. Calculate the Nash equilibrium in this game and the corresponding market price when firms simultaneously choose quantities. b. Now suppose firml moves earlier than firm 2 and firm 2 observes firm 1 quantity choice before choosing its quantity find optimal choices of firm 1 and firm 2.
So, which of these options are true about the number of sellers in your market - the market for corn? Kim There are many sellers (and, of course, many buyers). James That's correct. Corn is a product produced globally. There are thousands, if not hundreds of thousands, of individual farmers. Нарру Economics Mentor Is the corn that you produce different from your competitors? What kind of product do you sell? Kim Differences exist (heterogeneous) Undifferentiated (homogeneous)
**Practice** Consider a market with three firms. Each firm has a different cost function. We assume C1(q1) = 7q1, C2(q2) = q2 + 1, and C3(q3) = 3q3.