Consider two identical firms with no fixed costs and constant marginal cost c which compete in...
Consider two identical firms with no fixed costs and constant marginal cost c which compete in quantities in each of an infinite number of periods. The quantities chosen are observed by both firms before the next play begins. The inverse demand is given by p = 1 − q1 − q2, where q1 is the quantity produced by firm 1 and q2 is the quantity produced by firm 2. The firms use ‘trigger strategies’ and they revert to static Cournot behaviour if cooperation breaks down.
Derive the lowest value of the discount factor such that the firms can sustain the monopoly output level and discuss the economic reasoning behind your result.
Homework Answers
Add Answer to:
Consider two identical firms with no fixed costs and constant
marginal cost c which compete in...
2. There are two firms in a market that produce an identical good, both with marginal...
2. There are two firms in a market that produce an identical good, both with marginal cost MC=10. Fixed costs are zero for both firms. Suppose inverse demand for a product is P= 130 – e a) If the firms set the monopoly price and split the monopoly quantity. What quantities do they choose and what profit do they receive? b) Suppose they set quantities simultaneously. That is, suppose the firms play a Cournot game. What quantities do they choose...
Answer the following question. Please show all your working/explanation. Three firms compete a la Cournot (compete...
Answer the following question. Please show all your working/explanation. Three firms compete a la Cournot (compete in a Cournot Competition). Each firm has constant marginal cost c. Inverse demand curve is 1 - Q, where Q is the total quantity. Firm 1 moves first, and chooses q1 . After firm 1 chooses q1, firms 2 and 3 move second and simultaneously choose q2 and q3 . Find the equilibrium quantities q1, q2, q3 .
Question 2 (60 points) Consider two following Cournot competition between two firms, Firm 1 and Firm...
Question 2 (60 points) Consider two following Cournot competition between two firms, Firm 1 and Firm 2. The firms face an inverse demand function P = 600-Q where Q = 91 + 92 is the total output. Each unit produced costs c-$60. Therefore the profit of each farmer is given by π1 (J1.qz) = (600-91-J2)a1-6091 712 (41,42) (600 q1 q2)42-6092 Each firm. i simultaneusly chooses own qi to maximize own profits πί. a) (15 points) Find the Cournot NE quantities...
Two identical firms compete as a Cournot duopoly. The inverse market demand they face is P...
Two identical firms compete as a Cournot duopoly. The inverse market demand they face is P = 120-2Q. The total cost function for each firm is TC1(Q) = 4Q1. The total cost function for firm 2 is TC2(Q) = 2Q2. What is the output of each firm? Find: Q1 = ? Q2 = ?
Suppose there are two firms in a market producing differentiated products. Both firms have MC=0. The...
Suppose there are two firms in a market producing differentiated products. Both firms have MC=0. The demand for firm 1 and 2’s products are given by: q1(p1,p2) = 5 - 2p1 + p2 q2(p1,p2) = 5 - 2p2 + p1 a. First, suppose that the two firms compete in prices (i.e. Bertrand). Compute and graph each firm’s best response functions. What is the sign of the slope of the firms’ best-response functions? Are prices strategic substitutes or complements? b. Solve...
3. There are two firms that compete according to Cournot competition. Firm 1 has a cost...
3. There are two firms that compete according to Cournot competition. Firm 1 has a cost function G(91) = 5.59+12. Firm 2 has a cost function C(q2) = 2.5q3 + 18. These firms cannot discriminate, so there is just one price that is determined by the aggregate demand. The inverse demand equation is P(Q) = 600 – 0 Where total supply Q-q1+92. (e) Use your best response equations to mathematically solve for the equilibrium quantities qi 9, Q". equilibrium price...
4. (12 MARKS -6 FOR EACH PART) Two firms produce homogeneous products and compete as Cournot...
4. (12 MARKS -6 FOR EACH PART) Two firms produce homogeneous products and compete as Cournot duopolists. Inverse market demand is given by P 30 Q. Firm 1 has a marginal cost of 5 per unit. Firm 2's marginal cost is c2<5. (a) Suppose that c2 falls. What will happen to the Cournot equilibriumi) price, (ii) consumer surplus and total surplus, and (ii) the HHI? Explain your answer. (b) How does this example relate to criticisms of the use of...
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...
Let us consider a market where 3 firms I = {1, 2, 3} compete `a la...
Let us consider a market where 3 firms I = {1, 2, 3} compete `a la Cournot (quantity-setting competition). The inverse demand function is given by p(Q) = 300 − 5Q, where Q = q1 + q2 + q3. The cost function is homogeneous and it is C1(q) = C2(q) = C3(q) = 30q. Write explicitly the profit functions of each i ∈ I. Derive best reply functions and the Nash equilibrium of the game.
Two firms produce apples in Santa Cruz—call them firm 1 and firm 2. Apples produced by...
Two firms produce apples in Santa Cruz—call them firm 1 and firm 2. Apples produced by firm 1 are indistinguishable from apples produced by firm 2. The marginal cost of producing a bushel of apples is 200. The total demand for apples in Santa Cruz is given by P = 1400 – Q, and the firms compete in quantities, i.e., Cournot competition. Let q1 and q2 denote the production of apples by the two firms, and Q = q1 +...
2. There are two firms in a market that produce an identical good, both with marginal cost MC=10. Fixed costs are zero for both firms. Suppose inverse demand for a product is P= 130 – e a) If the firms set the monopoly price and split the monopoly quantity. What quantities do they choose and what profit do they receive? b) Suppose they set quantities simultaneously. That is, suppose the firms play a Cournot game. What quantities do they choose...
Question 2 (60 points) Consider two following Cournot competition between two firms, Firm 1 and Firm 2. The firms face an inverse demand function P = 600-Q where Q = 91 + 92 is the total output. Each unit produced costs c-$60. Therefore the profit of each farmer is given by π1 (J1.qz) = (600-91-J2)a1-6091 712 (41,42) (600 q1 q2)42-6092 Each firm. i simultaneusly chooses own qi to maximize own profits πί. a) (15 points) Find the Cournot NE quantities...
3. There are two firms that compete according to Cournot competition. Firm 1 has a cost function G(91) = 5.59+12. Firm 2 has a cost function C(q2) = 2.5q3 + 18. These firms cannot discriminate, so there is just one price that is determined by the aggregate demand. The inverse demand equation is P(Q) = 600 – 0 Where total supply Q-q1+92. (e) Use your best response equations to mathematically solve for the equilibrium quantities qi 9, Q". equilibrium price...
4. (12 MARKS -6 FOR EACH PART) Two firms produce homogeneous products and compete as Cournot duopolists. Inverse market demand is given by P 30 Q. Firm 1 has a marginal cost of 5 per unit. Firm 2's marginal cost is c2<5. (a) Suppose that c2 falls. What will happen to the Cournot equilibriumi) price, (ii) consumer surplus and total surplus, and (ii) the HHI? Explain your answer. (b) How does this example relate to criticisms of the use of...
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...
Most questions answered within 3 hours.
-
Explain the differences between rights and permissions within
Windows. Define the principle of least privilege and...
asked 12 seconds from now -
A solid, frictionless cylindrical reel of mass M=5.00kg and
radius R=0.55m is used to draw water...
asked 2 minutes ago -
how do radio waves get emitted from Jupiter?
- do they come from radiation from planet...
asked 2 minutes ago -
The test statistic used in the F test for the equality of two
variances is calculated...
asked 14 minutes ago -
How does neutralisation of IL-6 trans-signaling affect the
autoimmune disease and inflammation? What if the trans-signaling...
asked 4 minutes ago -
f an allele is 'fixed' in a population, what is its
frequency?
0.50
0.75
0.25
0...
asked 18 minutes ago -
Do we have a duty of national loyalty in business? What is the
major argument in...
asked 18 minutes ago -
compare the international treatment of segment reporting to the
us gaap treatment
asked 15 minutes ago -
A statistics student finds herself struggling with a newspaper
article stating that only eighteen percent of...
asked 48 minutes ago -
People with beriberi, a disease caused by a thiamin deficiency,
have elevated levels of blood pyruvate...
asked 35 minutes ago -
PYTHON Programming Exercise 2: Create a Simple Cost Calculator
Write a program that displays input fields...
asked 41 minutes ago -
1.Seki agreed that Groupon could sell 18 hot air
balloon rides on his Magical Adventures company...
asked 42 minutes ago