Profit maximization problem for firm one:
Differentiating the objective with respect to the quantity and
setting the derivative equal to zero:
Best response function for firm one is:
By symmetry, best response function of firm two is:
Solving the two functions:
At these quantities, market price is 120.
Profit earned by each firm is:
Consider the following market for hooded garments in which two firms, Oliver Queen, Inc. and Bruce Wayne, LLC are c...
O Consider the following market for hooded garments in which two firms, Oliver Queen, Inc. and Bruce Wayne, LLC are competing. They make equally good cowis. Suppose the inverse-demand for cowls is P-280 - Q. Each firm has to choose its quantity produced at the same time without communicating. Further, suppose that both Oliver Queen, Inc. and Bruce Wayne, LLC can make hoods at the same marginal cost of 40. What is the Nash Equilibrium of this game? What are...
Two Firms, Wayne Enterprises and Stark Industries, are deciding which city to open new branches. The three possible cities are Des Moines, Omaha, and Kansas City. The profits to be gained in each city are 50, 100, and 150, respectively. If a firm operates in a city alone, it takes all the profit. If both firms operate in the same city, they split the proift equally. Each firms choose one city to enter simultaneously Two firms, Wayne Enterprises and Stark...
Suppose there is a duopoly of two identical firms, A and B, facing a market inverse demand of ?=640−2?, and cost functions of ?? =40?? and ?? =40?? respectively. Find the Cournot-Nash equilibrium and profit for each firm. Suppose that A acts as the leader in a Stackelberg model and B responds. What are the respective quantities and profits of each firm now? Is it advantageous to move first? What are the prices, quantities and profits for the firms if...
Consider the case of two firms competing in a market. Each firm has a constant marginal cost equal to $10. The demand function is D(p) = 100 − p (p is the price in cents) Firms are competing by choosing prices simultaneously. When prices are equal, each firm gets exactly one half of the total demand. P must be an integer value. 1. Find all the Nash equilibria of this duopoly game. 2. Calculate each firms profit under any equilibria. 3....
Due Date: June 21, 2019 1. Consider the market for ayran. There are two firms producing ayran: Merve (firm 1) and Sutas (firm 2). Inverse demand function for ayran is given as: P = 110 qi-92- Both firms have a cost function of C(x) = x2, where x is the amount produced. (a) What is the Nash equilibrium if they choose the level of production at the same time? What are the profits of each firm? (b) Suppose now Merve...
Two firms are price-competing as in the standard Bertrand model. Each faces the market demand function D(p)=50-p. Firm 1 has constant marginal cost c1=10 and firm 2 has c2=20. As usual, if one of the firms has the lower price, they capture the entire market, and when they both charge exactly the same price they share the demand equally. 1. Suppose A1=A2={0.00, 0.01, 0.02,...,100.00}. That is, instead of any real number, we force prices to be listed in whole cents....
Consider a market in which two firms i = 1,2 produce a homogeneousproduct at constant marginal cost c= 4, facing total demand described by the linear inverse demand curve P= 16−Q. First assume that the firms compete by simultaneously choosing prices a la Bertrand. a. Suppose that F1 expects F2 to set some price p2 above the marginal cost c but below the monopoly price pm. What is F1’s best response BR1(p2) to this price p2? b. What is the...
8.3* In a market with an nual demand Q-100-1. there are two firms. A and B, that make identical products. Because their products are identical, if one charges a lower price than the other, all consumers will want to buy from the lower-priced firm. If they charge the same price, consumers are indifferent and end up splitting their purchases about evenly between the firms. Marginal cost is constant and there are no capacity constraints (a) What are the single-period Nash...
Exercise: Consider a market in which two firms i = 1, 2 produce a homogeneous product at constant marginal cost c = 4, facing total demand described by the linear inverse demand curve P = 16 − Q. First assume that the firms compete by simultaneously choosing prices a la Bertrand. 1. Suppose that F1 expects F2 to set some price p2 above the marginal cost c but below the monopoly price p m. What is F1’s best response BR1(p2)...
1. Consider a three firm (n = 3) Cournot oligopoly. The market inverse demand function is p (Q) = 24 Q. Firm 1 has constant average and marginal costs of $12 per unit, while firms 2 and 3 have constant average and marginal costs of $15 per unit. a)Verify that the following are Nash equilibrium quantities for this market: q1 = 9 / 2 and q2 = q3 = 3 / 2 . b)How much profit does each firm earn...