Assume that one firm will always locate at the top of the circle, and call that...
Assume that one firm will always locate at the top of the circle, and call that 0°. Then we know, for example, that with three firms, one Nash equilibrium has the firms locating at 0°, 120°, and 240°; and that the “most extreme” Nash equilibrium has the firms locating at (for example) 0°, 90°, and 180°. Here, “most extreme” means “as far as possible from perfect rotational symmetry”; you could also interpret it as “having the largest possible gap between some two firms”.
Suppose that entry costs $40.
- Is there a Nash equilibrium with 3 firms entering?
Explain.
[Note: think about both whether a new firm could profitably enter, and whether existing firms are profitable and want to stay in the market.] - Is there a Nash equilibrium with 4 firms entering? Explain.
- Is there a Nash equilibrium with 5 firms entering? Explain.
- What is the largest number of firms that could constitute a Nash equilibrium in this game? Explain.
Homework Answers
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Assume that one firm will always locate at the top of the
circle, and call that...
2. Two firms produce homogeneous products. Market demand is given by Q = 40-P, and each firm face...
2. Two firms produce homogeneous products. Market demand is given by Q = 40-P, and each firm faces a marginal cost of production of 4 per unit The timing of the game is as follows. In Period 1, firm 1 chooses the quantity q it will sell. In Period 2, firm 2 (who observed firm 1s choice in period 1) chooses whether or not to enter the market. If firm 2 chooses to enter it must pay an entry fee...
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It's pretty much just that pages discussing the graphs and explaining their meaning. would you like...
It's pretty much just that pages discussing the graphs and
explaining their meaning. would you like to see my notes? They're
pretty similar to the graph. I wrote down my answer but I'm still
pretty confused on it.
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Albertsons is currently the only grocery store in the West Park area and acts virtually as...
Albertsons is currently the only grocery store in the West Park area and acts virtually as the monopolist. The Albertsons manager hears a rumor that another grocer, Sprouts, is considering entering the market and building a grocery store in the same plaza as the Albertsons store. Since Albertsons is the incumbent firm, Sprouts must match the wage that Albertsons pays their workers. Further suppose that Albertsons workers are currently paid the minimum wage of $5/hour. Each firm has two strategies:...
Albertsons is currently the only grocery store in the West Park area and acts virtually as...
Albertsons is currently the only grocery store in the West Park area and acts virtually as the monopolist. The Albertsons manager hears a rumor that another grocer, Sprouts, is considering entering the market and building a grocery store in the same plaza as the Albertsons store. Since Albertsons is the incumbent firm, Sprouts must match the wage that Albertsons pays their workers. Further suppose that Albertsons workers are currently paid the minimum wage of $5/hour. Each firm has two strategies:...
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2. Two firms produce homogeneous products. Market demand is given by Q = 40-P, and each firm faces a marginal cost of production of 4 per unit The timing of the game is as follows. In Period 1, firm 1 chooses the quantity q it will sell. In Period 2, firm 2 (who observed firm 1s choice in period 1) chooses whether or not to enter the market. If firm 2 chooses to enter it must pay an entry fee...
Declining Industry: Consider two competing firms in a declining industry that cannot support both firms profitably. Each firm has three possible choices, as it must decide whether or not to exit the industry immediately, at the end of this quarter, or at the end of the next quarter. If a firm chooses to exit then its payoff is 0 from that point onward. Each quarter that both firms operate yields each a loss equal to -1, and each quarter that...
Please help with question d
PART II: GAME THEORY A few months ago, Samsung revealed their new smartphone whose screen folds and unfolds according to the user's preferences. This addition seems so promising and profitable that Apple is planning to enter the market for foldable smartphones as well and is deciding on its production scale. Naturally, Samsung is ready to respond and should decide which pricing structure is the most convenient: setting a high price"accommodate) or starting a price war....
It's pretty much just that pages discussing the graphs and
explaining their meaning. would you like to see my notes? They're
pretty similar to the graph. I wrote down my answer but I'm still
pretty confused on it.
1) Consider the figure below. FIGURE 32 Self-Reinforcing Effects and Clustering Total cost labor cos Prop cost Number of firms in cluster Profit of fimm cincter Imagine that there is a $3 per unit fall in labor costs show that change on...
4. Which of the following is NOT a true statement about market conditions for firms under perfect competition a. Each firm will produce as efficiently as possible b. Consumer surplus is maximized. c. Economic profits of firms will always be zero in the long run. d. Government intervention must move markets to equilibrium. c. Price - Long-Run Marginal Cost - min Long-Run Average Cost 5. In the market shown on the graph on the right ATC a. Mark profit maximizing...
1) Decreasing returns to scale may occur as increasing the amount of inputs used A) increases specialization B) may cause coordination difficulties. C) always increases the amount of output produced D) increases efficiency. 2) Which of the following statements is NOT true? A) AFC = AC - AVC C) AVC = wage/MPL B) AC = AFC + AVC D) C=F-VC 3) The more elastic the demand curve, a monopoly A) will have a larger Lemer Index. will face a lower...
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