Airline Manufacturer A and Airline Manufacturer B are duopolists in their industry. Explain how the two firms could collectively benefit if they were to collude and form a cartel. Why might collusion be difficult?
The airline industry is an example of oligopoly. The two firms could collectively benefit if they collude and form a cartel because collusion between the firms leads to an greement between the firms that both the firms will charge a higher price from the customers. If both the firms are charging same high prices then customers will have no option but to buy the product at higher prices and in this way both firms can make profits. However, maintaining cartel is difficult because each of the firm has an incentive to lower the price and capture market share while other firm is charging high price and they can earn higher profit by not following the agreement. Thus, even if one firm defaults on the agreement then cartel will fail and this makes collusion difficult in case of cartels.
Airline Manufacturer A and Airline Manufacturer B are duopolists in their industry. Explain how the two...
Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=200−QA−QBP=200−QA−QB where QAQA and QBQB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCA=1,500+55QA+QA2TCA=1,500+55QA+QA2 TCB=1,200+20QB+2QB2TCB=1,200+20QB+2QB2 Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). In...
There are only two firms in the widget industry. The total demand for widgets is Q 5 30-2P. The two firms have identical cost functions, TC 5 3 + 10Q. The two firms agree to collude and act as though the industry were a monopoly. At what price and quantity will this cartel maximize its profit?
An industry consists of two firms with identical demand function ? = 100 − ??, where ?? = ?1 + ?2. Both firms have identical cost ?? = 40??, where ? = 1,2. Both firms pay attention to the behaviour of their competitor in determining the output produced, and both firms make their decision simultaneously (no one moves first). (a) If both firms decide to compete in determining their outputs, find the profit maximizing q and P and calculate the...
Suppose the two firms form a cartel designed to generate monopoly level profits. Explain intuitively why we might expect the cartel to fail. Sentence form
The can industry is composed of two firms. Suppose that the demand curve for cans is P= 100- Q and total cost function of each firm is TC = 2 + 15q. b) If only one firm enters new market, how much will each firm produce and will make the profit? c) If both enter the new market, how much will each firm produce and will make the profit? e) If these two firms collude and they want to maximize...
Mathematical Question 3 (30pts) 3. Consider two firms are performing Cournot price competition in two differentiated goods markets. Firm 1 produces goods 1, and firm 2 produces goods 2, and two market demand functions are given by 91 (P1,P2) = 12-2p1 + P2 and 921,P2) = 12-2p2 + P 1. Furthermore, assume that the two firms have the same cost function such that fixed cost is $20 and variable cost is zero. a. (10pts) Calculate the equilibrium prices, quantities and...
16) . the same results as would exist if a 16) The oligopolistic model in which firms produce exactly called the model B) price monopolist controlled the entire industry is A) collusion Q maximin strategy D) Coumot the output that would be produced if the would be produced if the industry was 17) 17) In the Cournot model the final level of output is industry was a monopoly, and is the output that perfectly competitive. A) equal to; less than...
ECON M?C There are two firms in an industry. The industry demand curve is given by p = 60 - q. Each firm has one manufacturing plant and each firm i has a cost function C(q) = 97, where qi is the output of firm i. The two firms form a cartel and arrange to split total industry profits equally. Under this cartel arrangement, they will maximize joint profits if Select one: O a. each firm produces 15 units in...
A. Examine the U.S. passenger airline industry using the Five Forces. Is this an attractive industry? Why or why not? (Discuss: Supplier Power; Buyer Power; Substitutes; Rivalry; Entry) Explain your answer. B. Clear Channel, an owner of multiple radio stations with the Top 40 format, recently bought rock concert promoter Live Nation. How would this affect prices for concert tickets or rates for radio programming?
Two large diversified consumer products firms (Firm A and Firm B) are about to enter the market for a new pain reliever. The two firms are very similar in terms of their costs, strategic approach, and market outlook. The market demand curve for the pain reliever is given as: P = 2 – 0.000625Q where Q = QA + QB Both firms have the same constant marginal costs of production MCA = MCB = $0.50 per bottle; and fixed costs...