Suppose we have 2 firms competing in a Cournot manner with fixed costs. One equilibrium of...
Suppose we have 2 firms competing in a Cournot manner with fixed
costs.
One equilibrium of this game is only 1 firm producing. What
quantity will they produce and why is it an equilibrium?
Homework Answers
ANSWER:
GIVEN THAT:
WE HAVE 2 FIRMS COMPETING IN A FIXED COSTS AND EQUILIBRIUM:
1.Cournet Competition is a model in which two models are competing with each other and they themselves choose to produce their own quantity independently but it only applies when identical products are produced by the firms.
2. It was given by Augustin Cournet.Cournet Competition is also known as Nash Equilibrium.
3. If there is only one firm producing, then the firm might have the monopoly power and they can set the price on their own .
4. They will produce only that level of quantities of products,where Marginal revenue equals to Marginal cost.
5.Monopoly market achieves the equilibrium level when the level of output produced in the condition where MR=MC.
Add Answer to:
Suppose we have 2 firms competing in a Cournot manner with fixed
costs.
One equilibrium of...
Suppose there are two firms, 1 and 2, competing in quantity. The market demand is p...
Suppose there are two firms, 1 and 2, competing in quantity. The market demand is p = 15-(q1 +q2), where q1 and q2 are the quantities produced by rms 1 and 2. Both rms have constant marginal cost c1 = c2 = 3. (a) [10] Find the Cournot equilibrium of this market. Compute the consumer surplus in equilibrium. b) Now suppose firms 1 and 2 merge, so that they become a monopolist with demand function p = 15 ? q,...
7. Consider an asymmetric Cournot duopoly game, where the two firms have different costs of production....
7. Consider an asymmetric Cournot duopoly game, where the two firms have different costs of production. Firm 1 selects quantity qı at a pro- duction cost of 291. Firm 2 selects quantity 92 and pays the produc- tion cost 492. The market price is given by p = 12 – 91 - 92. Thus, the payoff functions are u(91,92) = (12 – 91 - 92.91 – 291 and uz(9192) = (12 – 91 - 92)92 – 492. Calculate the firms'...
Suppose two firms (Firm 1 and Firm 2) are engaged in Cournot competition. Both firms are...
Suppose two firms (Firm 1 and Firm 2) are engaged in Cournot competition. Both firms are currently producing the Nash equilibrium quantities. If firm 1 were to unilaterally reduce their production by one unit, what would happen to firm 1's profit? Firm 1's profit would decrease Firm 1's profit would increase Firm 1's profit would stay the same There is not enough information to answer this question
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition....
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition. The demand is P = 2 - Q where Q =q1+q2. Assume ci = 1 and c2 = , i.e., Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits).
Problem 4. Cournot Competition With Different Costs Suppose there are two firms engaged in quantity cornpetition....
Problem 4. Cournot Competition With Different Costs Suppose there are two firms engaged in quantity cornpetition. The demand is P = 2-Q where Q qi + 92. Assunie c.-1 and c2 =丨, ie.. Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits)
8. Suppose two long-lived firms are engaged on repeated Cournot competition. The firms have a common...
8. Suppose two long-lived firms are engaged on repeated Cournot competition. The firms have a common discount factor 8. Each period, firms choose simultaneously how much to produce. Suppose that each firm can only choose between a high output (H), or a low output (L). The stage game payoffs are as follows. HL H 4,4 1,6 L 6,1 2,2 (a) Which actions are dominated in the stage game? (b) Which outcomes are Pareto dominated in the stage game? (c) Find...
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition....
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition. The demand is P = 2 - Q where Q=q1 +22. Assume cı = { and c2 = , i.e., Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits). price, and profits).
Suppose we have two firms with the same cost C(q) = {Q2 in a market which...
Suppose we have two firms with the same cost C(q) = {Q2 in a market which demand is Q 18 – P, the two firms compete in the Cournot Model. a. Set up firm 1's profit maximization and best response function. b. Solve for firm 1's quantity, firm 2's quantity, the equilibrium market quantity, and price. Please show your work. c. Is this a Nash equilibrium?
Suppose the two firms cannot collude and instead compete in the Cournot Model in the market...
Suppose the two firms cannot collude and instead compete in the Cournot Model in the market described in question 1 (market demand is still Q=18-P) with the same cost (C(Q)=1/2 *Q^2). Set up firm 1’s profit maximization. Solve for firm 1’s best response function. Solve for firm 1’s quantity, firm 2’s quantity, the equilibrium market quantity, and price. Show your work. Is this a Nash equilibrium? Do consumers prefer the Cournot competition equilibrium over the collusion of the two firms...
4. Consider 2 firms selling fertilizer competing as Cournot duopolists. The inverse demand function facing the...
4. Consider 2 firms selling fertilizer competing as Cournot duopolists. The inverse demand function facing the fertilizer market is P = 1 - where Q = 94 +98. For simplicity, assume that the long-run marginal cost for each firm is equal to X, i.e. C(q)=Xq for each firm. a) Find the Cournot Nash equilibrium where the firms choose output simultaneously b) Find the Stackelberg Nash Equilibrium where firm A as the Stackelberg leader. How much does the leader gain by...
7. Consider an asymmetric Cournot duopoly game, where the two firms have different costs of production. Firm 1 selects quantity qı at a pro- duction cost of 291. Firm 2 selects quantity 92 and pays the produc- tion cost 492. The market price is given by p = 12 – 91 - 92. Thus, the payoff functions are u(91,92) = (12 – 91 - 92.91 – 291 and uz(9192) = (12 – 91 - 92)92 – 492. Calculate the firms'...
Suppose two firms (Firm 1 and Firm 2) are engaged in Cournot competition. Both firms are currently producing the Nash equilibrium quantities. If firm 1 were to unilaterally reduce their production by one unit, what would happen to firm 1's profit? Firm 1's profit would decrease Firm 1's profit would increase Firm 1's profit would stay the same There is not enough information to answer this question
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition. The demand is P = 2 - Q where Q =q1+q2. Assume ci = 1 and c2 = , i.e., Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits).
Problem 4. Cournot Competition With Different Costs Suppose there are two firms engaged in quantity cornpetition. The demand is P = 2-Q where Q qi + 92. Assunie c.-1 and c2 =丨, ie.. Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits)
8. Suppose two long-lived firms are engaged on repeated Cournot competition. The firms have a common discount factor 8. Each period, firms choose simultaneously how much to produce. Suppose that each firm can only choose between a high output (H), or a low output (L). The stage game payoffs are as follows. HL H 4,4 1,6 L 6,1 2,2 (a) Which actions are dominated in the stage game? (b) Which outcomes are Pareto dominated in the stage game? (c) Find...
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition. The demand is P = 2 - Q where Q=q1 +22. Assume cı = { and c2 = , i.e., Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits). price, and profits).
Suppose we have two firms with the same cost C(q) = {Q2 in a market which demand is Q 18 – P, the two firms compete in the Cournot Model. a. Set up firm 1's profit maximization and best response function. b. Solve for firm 1's quantity, firm 2's quantity, the equilibrium market quantity, and price. Please show your work. c. Is this a Nash equilibrium?
4. Consider 2 firms selling fertilizer competing as Cournot duopolists. The inverse demand function facing the fertilizer market is P = 1 - where Q = 94 +98. For simplicity, assume that the long-run marginal cost for each firm is equal to X, i.e. C(q)=Xq for each firm. a) Find the Cournot Nash equilibrium where the firms choose output simultaneously b) Find the Stackelberg Nash Equilibrium where firm A as the Stackelberg leader. How much does the leader gain by...
Most questions answered within 3 hours.
-
question
you were
asked to create a regression that will predict the amount of saving
for...
asked 2 minutes ago -
If tcalc = -2.78, tcrit = 1.96, H0: Mu > Mu0, and Xbar <
Mu0, what...
asked 24 minutes ago -
Circular distribution
•Suppose two birds are flying, one is flying from the north and
the other...
asked 22 minutes ago -
please answer all... it all counts as a discussion problem
1a qualitative data and proportions: Suppose...
asked 27 minutes ago -
Typing The Answer Is Mandatory
Temperature is a measure of heat. More heat means that more...
asked 17 minutes ago -
An ideal gas ( 2.00 mol) is the working substance in an engine
that operates on...
asked 15 minutes ago -
Assume you are working with a standard deck of 52 cards. There
are 13 cards (2,...
asked 21 minutes ago -
A cell phone company offers two plans to its subscribers. At the
time new subscribers sign...
asked 20 minutes ago -
Write a program that reads a floating point number and prints
“zero” if the number is...
asked 25 minutes ago -
Geoff has been running a restaurant in the city for many years.
He knows from experience...
asked 35 minutes ago -
NaOH is added to a buffer solution composed of C6H5COOH and
C6H5COO―. Which of the following...
asked 27 minutes ago -
Program: Write a complete C++ program that is
made of functions main() and rShift(). The rShift()...
asked 35 minutes ago