Please help me with this problem
c).
In the “Bertrand Model” with the differentiated good a firm having cost disadvantaged will stray into the industry . Since, there are new customer will still purchase a particular good at the higher price compare the available substitute good. But in the case of the homogeneous good it’s not possible that the two firms will change different price. If a firm will have cost disadvantage will not able to service in to the industry.
Please help me with this problem 6. Differentiated product Bertrand. Suppose that firm Y produces yellow...
4. Homogenous product Bertrand. Suppose that the demand for marbles is given by Q- 80 - 5P, where Q is measured in bags of marbles. There are two firms that supply the market, and the firms produce identical marbles (i.e., they are homogenous products). Firm 1 has a constant marginal cost of $10.00/bag, while firm 2 has a constant marginal cost of S5.00/bag. The two firms compete in price. In Nash Equilibrium, what prices will the two firms set? How...
Suppose there are two firms in a market producing differentiated products. Both firms have MC=0. The demand for firm 1 and 2’s products are given by: q1(p1,p2) = 5 - 2p1 + p2 q2(p1,p2) = 5 - 2p2 + p1 a. First, suppose that the two firms compete in prices (i.e. Bertrand). Compute and graph each firm’s best response functions. What is the sign of the slope of the firms’ best-response functions? Are prices strategic substitutes or complements? b. Solve...
There are two firms. Firm 1 (or, a small firm) produces a single product, product A, at zero cost. Firm 2 (or, a big firm) is a multi-product firm that sells both products A and B. Firm 2 is less efficient in producing A. It incurs a constant marginal cost c > 0 for producing A. However, firm 2 is a monopolist of the market of product B and its cost of producing product B is zero. A unit mass...
Differentiated Bertrand competition versus price leadership. The demand for two brands of laundry detergent, Wave (W) and Rah (R), are given by the following demands: Qw =80–2pW +pR QR =80–2pR +pWThe firms have identical cost functions, with a constant marginal cost of 10. The firms compete in prices. (a) What is the best response function for each firm? (that is, what is firm W's optimal price as a function of firm R’s price, and vice-versa?) What is the equilibrium to...
4. Suppose that firm 1 and firm 2 each produce the same product and face a market demand curve given by Q = 5000 – 200P. Firm 1 has a unit (marginal) cost of production ci = 6 while firm 2 has a unit cost of c2 = 10. Firms compete by setting prices and consumers in this market will always purchase from the firm with the lower price. In addition, suppose that firms must choose an integer price. This...
I only need answers for the Bertrand Nash Equilibrium section. please provide answers with as much details as possible. Thank you Oligopoly There are two firms competing in the market for Airplanes - Boeing and Airbus. The market demand is given by Q = 120 - P. Boeing has lower Marginal Costs of production than Airbus. Thus MCB = $20, MCA = $40. Assume that TFC = $0 for both firms. (Think of price being in thousands.) Boeing a) Derive...
Problem 5: Product Differentiation in a Bertrand Setting. Firms 1 and 2 face the same AC = MC = 30 but sell differentiated products. The demands for firms 1 and 2 are given by D.(P1, P2) = 70 – P1 + P2 D2(P1, P2) = 70 – P2 +5 P1 The firms choose prices Pı and P2 simultaneously. a) For each firm, represent profits as a function of both prices p and p2. b) Find the best response function for...
EC202-5-FY 10 9Answer both parts of this question. (a) Firm A and Firm B produce a homogenous good and are Cournot duopolists. The firms face an inverse market demand curve given by P 10-Q. where P is the market price and Q is the market quantity demanded. The marginal and average cost of each firm is 4 i. 10 marks] Show that if the firms compete as Cournot duopolists that the total in- dustry output is 4 and that if...
Two airlines compete for passengers on a one-way flight Philadelphia Orlando, FL. They differentiate their products primarily on product quality, with Firm A providing more upscale service, while Firm B operates more as an economy airline. The demand curve for Firm A's product (upscale service) is: Qa- 720-2Pa PB, Firm B has a product (economy service) demand curve equal to: QB-528-3Ps + 2PA The marginal cost for firm A is $70 per passenger, for firm B it is $40 per...
Q1 Consider an industry with one manufacturer M and two retail firms R1 and R2. The manufacturer produces a homogenous good at a marginal cost of 20. The retailer buys the product from the manufacturer and sells to the final consumers. Downstream demand in the industry is given by D(p) = 260 − p where p is the final retail price p. (a) As a benchmark, suppose M and R1 are vertically integrated and stop supplying R2. Which price does...