Question

Question 6 Two firms compete in a Bertrand Hotelling fashion in the sale of Soma. 1000 customers are uniformly distributed on the line between 0 and 1. Firm 1 is at the left endpoint, i.e. at 0 and Page 4 the firm 2 at the right endpoint, i.e. at 1. Travel costs for consumes are $1 a unit per mile. If firm i produces qi units it incurs a production cost of 0.597. There is a new technology that will change the production costs of each firm to a constant marginal cost of $1 a unit. If both firms adopt this technology will they each be better off?

Two firms compete in a Bertrand-Hotelling fashion in the sale of Soma. 1000 customers are uniformly distributed on the line between 0 and 1. Firm 1 is at the left endpoint, i.e. at 0 and the firm 2 at the right endpoint, i.e. at 1. Travel costs for consumes are $1 a unit per mile. If firm i produces qi units it incurs a production cost of 0.5qi^2. There is a new technology that will change the production costs of each firm to a constant marginal cost of $1 a unit. If both firms adopt this technology will they each be better off?

Answer 1

Answer:

Since the new innovation just influences the creation cost we just need to contrast the old creation costs and the new creation expenses to come to the end result for both the organizations.

Old creation cost = 0.5 * qi2

where qi is the amount delivered by I firms

New negligible creation cost = 1

New all out creation cost = minimal expense * amount

= 1 * q i

= qi

Presently Benefit of changing the innovation = Old creation cost - New creation cost

Benefit = 0.5 * qi2 - qi

= qi * ( 0.5 qi - 1 )

Presently qi is constantly positive

So how about we discover when the subsequent part is sure

( 0.5 qi - 1 ) > 0

0.5 qi > 1

qi> 2

Subsequently benefit of changing the innovation is sure when the amount delivered is more prominent than 2.

Also, the two innovations are at standard when amount delivered rises to 2. Considering the organizations have an accessible arrangement of 1000 clients, plainly amounts delivered by both the organizations must be more prominent than 2.

In this manner both the organizations will be in an ideal situation moving to more up to date innovation