Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
Question
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Chapter 15, Problem 15.2P

a)

To determine

To determine profit maximising price-quantity combination and profits for a monopolist.

b

To determine

Nash equilibrium quantities for Cournot duopolists, which choose quantities simultaneously. Also compute market output, market price, and firm and industry profits.

c)

To determine

Nash equilibrium prices for Bertrand duopolists. Also compute firm and market output, and firm and industry profits.

d)

To determine

Nash equilibrium quantities for n identical firms in a Cournot model. Also compute market output, market price, and firm and industry profits.

e)

To determine

To show monopoly outcome from part (a) can be reproduced in part (d) by setting n=1 , that the Cournot duopoly outcome from part (b) can be reproduced in part (d) by setting n=2 in pard (d) , and that letting n approach infinity yields the same market price, output and industry profits as in part (c).

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Use a game tree to illustrate why an aircraft manufacturer may price below the current marginal cost in the short run if it has a steep learning curve.   ​(Hint​: Show that learning by doing lowers its cost in the second​ period.) Part 2 Assume for simplicity the game tree is illustrated in the figure to the right. Pricing below marginal cost reduces profits but gives the incumbent a cost advantage over potential rivals. What is the subgame perfect Nash​ equilibrium?
Answer
M” method  Given the following model, solve by the method of “M”. (see image)
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