Gruber and Shyft are ridesharing companies that have a duopoly in Teslandia. They compete over quantity,...
Gruber and Shyft are ridesharing companies that have a duopoly in Teslandia. They compete over quantity, which is the number of rides per day. The daily demand for rides in Teslandia is given by Q = 80,000 – 1000p, where p is the price per ride. The marginal cost per ride is the same for both companies at $20.
(1) What is the Cournot equilibrium quantity for Gruber?
(2) What is the Cournot equilibrium price?
(3) Assume the firms offer a homogenous product (ride), and suppose instead of competing over quantity they compete over price. What is the Bertrand equilibrium price?
(4) If they could form a cartel and split the profits, what price would they charge?
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Gruber and Shyft are ridesharing companies that have a duopoly
in Teslandia. They compete over quantity,...
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?
EC202-5-FY 10 9Answer both parts of this question. (a) Firm A and Firm B produce a homogenous good and are Cournot duopolists. The firms face an inverse market demand curve given by P 10-Q. where...
EC202-5-FY 10 9Answer both parts of this question. (a) Firm A and Firm B produce a homogenous good and are Cournot duopolists. The firms face an inverse market demand curve given by P 10-Q. where P is the market price and Q is the market quantity demanded. The marginal and average cost of each firm is 4 i. 10 marks] Show that if the firms compete as Cournot duopolists that the total in- dustry output is 4 and that if...
Problem 1 Consider the following Cournot's duopoly, where two identical firms compete by setting quantities. Suppose...
Problem 1 Consider the following Cournot's duopoly, where two identical firms compete by setting quantities. Suppose the Market demand is P = 80 - 2Q and firm's cost function is TC = 20qi, where i = 1,2 (a) Determine each firm's equilibrium quantity, profit and the market equilibrium price. Explain (b) Suppose firms decide to form a cartel. In the static (one-period) case, will they be able to sustain the cartel? Explain using the appropriate pay-off matrix (c) How will...
Suppose the two firms cannot collude and instead compete in the Cournot Model in the market...
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3. Suppose the two firms cannot collude and instead compete in the Cournot Model in the...
3. Suppose the two firms cannot collude and instead compete in the Cournot Model in the market described in question 1 (market demand is still Q = 18 – P) with the same cost (C(Q)=Q2). a. Set up firm 1's profit maximization. b. Solve for firm 1's best response function. C. Solve for firm 1's quantity, firm 2's quantity, the equilibrium market quantity, and price. Show your work. d. Is this a Nash equilibrium? e. Do consumers prefer the Cournot...
2. (16 points) Monopoly and Bertrand opoly and Bertrand Duopoly. In a monopoly market, the de...
2. (16 points) Monopoly and Bertrand opoly and Bertrand Duopoly. In a monopoly market, the de mand is p = 240 - 20. The firm's cost function is: for Q>O, C(Q) = 40 (a) Find the monopoly quantity and price.. Q = and PM = (b) Find the deadweight loss in the monopoly model. DWL = (c) If instead there are two identical firms that compete according to Bertrand price competition, is the equilibrium price? Pi = p = ____...
A homogeneous product duopoly faces a market demand function given by p = 300 - 3Q,where...
A homogeneous product duopoly faces a market demand function given by p = 300 - 3Q,where Q = q1 + q2. Both firms have constant marginal cost MC = 100. (part 2) 1a. What is the Bertrand equilibrium price and quantity in this market? 1b. Suppose Firm 1 is the Stackelberg leader, what is the equilibrium price in this market if Firm 2 plays the follower in this duopoly market? What is the equilibrium quantity? How much does each firm...
1. Suppose there are two firms with constant marginal cost MC = 3 and the market...
1. Suppose there are two firms with constant marginal cost MC = 3 and the market demand is P = 63 − 5Q. (a) Calculate the market price and profits for each firm in each of the following settings: • Cartel • Cournot duopoly • Bertrand duopoly (firms can set any price) (b) Using part a), construct a 3×3 payoff matrix where the firms are choosing prices. The actions available to each of two players are to charge the price...
1. Consider the following asymmetric version of the Cournot duopoly model. Two firms compete by simultaneously...
1. Consider the following asymmetric version of the Cournot duopoly model. Two firms compete by simultaneously choosing the quantities (q, and q2) they produce. Their products are homogeneous, and market demand is given by p- 260-2Q, where Q-q +q2. Firm 1 has a cost advantage; Firm 1 produces at zero cost, while Firm 2 produces at a constant average cost of 40. (The difference in costs is what makes this an asymmetric game.) a. Derive both firms' profit functions, as...
MomCorp (M) and Planet Express, Inc. (E) are two firms that compete in a Cournot duopoly...
MomCorp (M) and Planet Express, Inc. (E) are two firms that compete in a Cournot duopoly by simultaneously setting quantities (of package deliveries). Denote MomCorp's quantity by Q and Planet Express's quantity by Qe. The package deliveries they offer are identical, so the price is determined in a combined market according to the inverse demand equation, P = 120-Q, where Q = Qu + Qe. Suppose that MomCorp has constant marginal cost, MCM = 20, while Planet Express has constant...
EC202-5-FY 10 9Answer both parts of this question. (a) Firm A and Firm B produce a homogenous good and are Cournot duopolists. The firms face an inverse market demand curve given by P 10-Q. where P is the market price and Q is the market quantity demanded. The marginal and average cost of each firm is 4 i. 10 marks] Show that if the firms compete as Cournot duopolists that the total in- dustry output is 4 and that if...
Problem 1 Consider the following Cournot's duopoly, where two identical firms compete by setting quantities. Suppose the Market demand is P = 80 - 2Q and firm's cost function is TC = 20qi, where i = 1,2 (a) Determine each firm's equilibrium quantity, profit and the market equilibrium price. Explain (b) Suppose firms decide to form a cartel. In the static (one-period) case, will they be able to sustain the cartel? Explain using the appropriate pay-off matrix (c) How will...
3. Suppose the two firms cannot collude and instead compete in the Cournot Model in the market described in question 1 (market demand is still Q = 18 – P) with the same cost (C(Q)=Q2). a. Set up firm 1's profit maximization. b. Solve for firm 1's best response function. C. Solve for firm 1's quantity, firm 2's quantity, the equilibrium market quantity, and price. Show your work. d. Is this a Nash equilibrium? e. Do consumers prefer the Cournot...
2. (16 points) Monopoly and Bertrand opoly and Bertrand Duopoly. In a monopoly market, the de mand is p = 240 - 20. The firm's cost function is: for Q>O, C(Q) = 40 (a) Find the monopoly quantity and price.. Q = and PM = (b) Find the deadweight loss in the monopoly model. DWL = (c) If instead there are two identical firms that compete according to Bertrand price competition, is the equilibrium price? Pi = p = ____...
1. Consider the following asymmetric version of the Cournot duopoly model. Two firms compete by simultaneously choosing the quantities (q, and q2) they produce. Their products are homogeneous, and market demand is given by p- 260-2Q, where Q-q +q2. Firm 1 has a cost advantage; Firm 1 produces at zero cost, while Firm 2 produces at a constant average cost of 40. (The difference in costs is what makes this an asymmetric game.) a. Derive both firms' profit functions, as...
MomCorp (M) and Planet Express, Inc. (E) are two firms that compete in a Cournot duopoly by simultaneously setting quantities (of package deliveries). Denote MomCorp's quantity by Q and Planet Express's quantity by Qe. The package deliveries they offer are identical, so the price is determined in a combined market according to the inverse demand equation, P = 120-Q, where Q = Qu + Qe. Suppose that MomCorp has constant marginal cost, MCM = 20, while Planet Express has constant...
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