Homework Answers
Coornot game is more efficient because the price charged is lower, quantity produced is higher, and the size of the Dead weight loss is a small.
In contrast the stackelberg game has a higher price all over quantity and a higher deadweight loss. For the stackelberg leader the profit is more while for the follower the profit is less in comparison to what the same firn can on in a cournot competition. Both of these firms first select the quantity. Stackelberg is a sequential game where the leader produces first. Cournot competition has both the firms operating and making decisions simultaneously.
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4. Think about a Cournot and a Stackelberg game. What do firms choose? Who goes first?...
Compare the duopoly outcomes under the Cournot and Stackelberg games. How do the two firms compete?...
Compare the duopoly outcomes under the Cournot and Stackelberg games. How do the two firms compete? Are the decisions simultaneous or sequential? In which game are profits higher? Which game is more efficient–i.e. leads to a higher quantity and a lower price–when the two firms have the same cost functions?
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)
5. (i) Consider a Cournot quantity setting game of simultaneous moves. Solve for the rationalizable strategies...
5. (i) Consider a Cournot quantity setting game of simultaneous moves. Solve for the rationalizable strategies (quantities) for the two firms that simultaneously choose quantities to produce, which then determines the price at which the produced goods will sell. The marginal cost of production is 4 for firml and 2 for firm 2. P = 40-91-92 Find the equilibrium price and the profits of each firm. (15) ii) Now model the game as a sequential move game where firm 1...
(5 pts) When firms choose quantities of output, as in the Cournot model, what happens to...
(5 pts) When firms choose quantities of output, as in the Cournot model, what happens to the marginal revenue of the firm when the rival increases its quantity? When firms choose prices, as in the Bertrand model with differentiated products, what happens to the marginal revenue of the firm when the rival increases its price? How is this related to the slopes of the reaction functions in the Cournot and Bertrand models?
3. We will examine the idea of oligopolies in this problem. The examples here will be...
3. We will examine the idea of oligopolies in this problem. The examples here will be based on the ideas of competition over quantity for identical goods (i.e. Cournot and Stackelberg) (a) (4 points) We begin with a 3 firm oligopoly and the assumption that each firm is using the minimal efficient scale, i.e. the lowest cost production method. Let market demand be P(Q) = 1200 5Q where Q 2 + 3. Assume each firm has a cost of C(qa)...
2. In class we discussed the Stackelberg market competition model in the case where there were...
2. In class we discussed the Stackelberg market competition model in the case where there were two firms sequentially announcing their production quantities qı and q2. Recal that we assumed the firms wish to maximize profit (which equals revenue minus cost) The cost to firm i to produce q, units is cq, and the per unit sales price when Q q2 units are produced in total is P(Q)-α-Q if Q-α and zero otherwise. We assume Suppose now there are three...
1.Consider an industry with only two firms that produce identical products. Each of the firms only...
1.Consider an industry with only two firms that produce identical products. Each of the firms only incurs a fixed cost of $1000 to produce and marginal cost is 20. The market demand function is as follows: Q=q1+q2=400-P a. Assuming that the firms form a cartel, calculate the profit-maximizing quantity of output, price and profits b. If the firms choose to behave as in the Cournot model, what would be the profit- maximizing quantities of output, price and profits? c. if...
pls answer as many qwuestions!! 1. A market has an inverse demand curve and four firms,...
pls
answer as many qwuestions!!
1. A market has an inverse demand curve and four firms, each of which has a constant marginal cost of. If the firms form a profit-maximizing cartel and agree to operate subject to the constraint that each firm will produce the same output level, how much does each firm produce? 2. Duopoly quantity-setting firms face the market demand curve. Each firm has a marginal cost of $60 per unit. a. What is the Nash-Cournot equilibrium?...
= Consider an industry consisting of two firms which produce a homogeneous commodity. The industry demand...
= Consider an industry consisting of two firms which produce a homogeneous commodity. The industry demand function is Q = 100 – P, where Q is the quantity demanded and P is its price. The total cost functions are given as C1 = 50q1 for firm 1, and C2 = 60qz for firm 2, where Q 91 +92. a. (6 points) Suppose both firms are Cournot duopolists. Find and graph each firm's reaction function. What would be the equilibrium price,...
For this Cournot problem, you have two firms that are simultaneously deciding of what quantity to...
For this Cournot problem, you have two firms that are simultaneously deciding of what quantity to produce to maximize their profits. Given the following P=100-Q and Q=q1+q2 the total cost = Q40 1.What is each firm's profit-maximizing quantity? 2.What is the market price? 3.How much profit does each firm make? 4.What would happen if one firm doubled or halved its profit-maximizing quantity?
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)
5. (i) Consider a Cournot quantity setting game of simultaneous moves. Solve for the rationalizable strategies (quantities) for the two firms that simultaneously choose quantities to produce, which then determines the price at which the produced goods will sell. The marginal cost of production is 4 for firml and 2 for firm 2. P = 40-91-92 Find the equilibrium price and the profits of each firm. (15) ii) Now model the game as a sequential move game where firm 1...
(5 pts) When firms choose quantities of output, as in the Cournot model, what happens to the marginal revenue of the firm when the rival increases its quantity? When firms choose prices, as in the Bertrand model with differentiated products, what happens to the marginal revenue of the firm when the rival increases its price? How is this related to the slopes of the reaction functions in the Cournot and Bertrand models?
3. We will examine the idea of oligopolies in this problem. The examples here will be based on the ideas of competition over quantity for identical goods (i.e. Cournot and Stackelberg) (a) (4 points) We begin with a 3 firm oligopoly and the assumption that each firm is using the minimal efficient scale, i.e. the lowest cost production method. Let market demand be P(Q) = 1200 5Q where Q 2 + 3. Assume each firm has a cost of C(qa)...
2. In class we discussed the Stackelberg market competition model in the case where there were two firms sequentially announcing their production quantities qı and q2. Recal that we assumed the firms wish to maximize profit (which equals revenue minus cost) The cost to firm i to produce q, units is cq, and the per unit sales price when Q q2 units are produced in total is P(Q)-α-Q if Q-α and zero otherwise. We assume Suppose now there are three...
pls
answer as many qwuestions!!
1. A market has an inverse demand curve and four firms, each of which has a constant marginal cost of. If the firms form a profit-maximizing cartel and agree to operate subject to the constraint that each firm will produce the same output level, how much does each firm produce? 2. Duopoly quantity-setting firms face the market demand curve. Each firm has a marginal cost of $60 per unit. a. What is the Nash-Cournot equilibrium?...
= Consider an industry consisting of two firms which produce a homogeneous commodity. The industry demand function is Q = 100 – P, where Q is the quantity demanded and P is its price. The total cost functions are given as C1 = 50q1 for firm 1, and C2 = 60qz for firm 2, where Q 91 +92. a. (6 points) Suppose both firms are Cournot duopolists. Find and graph each firm's reaction function. What would be the equilibrium price,...
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