Question

16:29 Back Problem Set 2 ECON 461 Problem Set 2 Summer 2019 Each qustion will receive equal weight in grading 1. Consider a duopoly in which two firms produce difierent varieties of a differentiated product at constant average and marginal cost 4 per unit. Let the equations of the inverse demand curves be P 700- 7 P-200- +9 (both equations valid wheree the implied prices and quantities are nonnega tive) (a) find Nash equilibrium prices, quantities, and payoffs for a cee-shot game if both firms set quantities (b) find Nash equilibrium prices, quantities, and payofs for a one-sbot game if both firms set prices (c) Compare equilibrium prices in (a) and (b). Which type of coempetiticn (in quantities or in prices) has lower equilibeium prices? Why? Show the derivations of your answers. 2. (a) Give the assmptions of the Hotelling linear or "main street" model (b) If a linear market is 200 kikometers loag, there are two suppliers, firm A located 10 kilometers from the left end of the market and firm B located 20 kilometers from the right end of the market., and transportation cost t is 17 per unit distance, what are the equilibrium prices and profits per firm Assume marginal and average production cost is zero. Show the derivations of your answers (c) Draw a graph illustrating the equilibrium Problem Set 2 Summer 2019 ECON 461 Each question will receive equal weight in grading. 1. Consider a duopoly in which two firms produce different varieties of a differentiated product at constant average and marginal cost 4 per unit. Let the equations of the inverse demand curves be 7 P1=700 91+ 5 (4) 7 /6 P2-700- 5 +9 (both equations valid where the implied prices and quantities are nonnega- tive). (a) find Nash equilibrium prices, quantities, and payoffs for a one-shot game if both firms set quantities. (b) find Nash equilibrium prices, quantities, and payoffs for a one-shot game if both firms set prices. (c) Compare equilibrium prices in (a) and (b). Which type of competition (in quantities or in prices) has lower equilibrium prices? Why? Show the derivations of your answers. 2 (a) Give the assumptions of the Hotelling linear or "main street" model. (b) If a linear market is 200 kilometers long, there are two suppliers, firm A located 10 kilometers from the left end of the market and firm B located 20 kilometer from the right end of the market, and transportation cost t is 17 per unit distance, what are the equilibrium prices and profits per firm? Assume marginal and average produetion cost is zero. Show the derivations of your answers. (c) Draw a graph illustrating the equilibrium. t- Problem Set 2 Summer 2019 ECON 461 Each question will receive equal weight in grading. 1. Consider a duopoly in which two firms produce different varieties of a differentiated product at const ant average and marginal the equations of the inverse demand curves be cost 4 per unit. Let 7 41 + 5 P1=700 7 /6 P2= 700 (both equations valid where the implied prices and quantities are nonnega- tive). find Nash equilibrium prices, quantities, and payoffs for a one-shot game if both firms set quantities. (b) find Nash equilibrium prices, quantities, and payoffs for a one-shot game if both firms set prices. (c) Compare equilibrium prices in (a) and (b). Which type of competition (in quantities or in prices) has lower equilibrium prices? Why? Show the derivations of your answers. (a) Give the assumptions of the Hotelling linear or "main street" model. (b) If a linear market is 200 kilometers long, there are two suppliers, firm A located 10 kilometers from the left end of the market and firm B located 20 kilometers from the right end of the market, and transportation cost t is 17 per unit distance, what are the equilibrium prices and profits per firm? Assume marginal and average production cost is zero. 2 Show the derivations of your answers. (e) Draw a graph illustrating the equilibrium.

Answer 1

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