Question

Consider a market with two identical firms. The market demand is P = 26 – 2Q,...

Consider a market with two identical firms. The market demand is P = 26 – 2Q, where Q = q1 + q2. MC1 = MC2 = 2.

1. Solve for output and price with collusion.

2. Solve for the Cournot-Nash equilibrium.

3. Now assume this market has a Stackelberg leader, Firm 1. Solve for the quantity, price, and profit for each firm.

4. Assume there is no product differentiation and the firms follow a Bertrand pricing model. Solve for the Bertrand equilibrium and calculate output, price, and profit for each firm.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
SCENARIO 3: Consider an industry consisting of two firms producing an identical product. The inverse market...
SCENARIO 3: Consider an industry consisting of two firms producing an identical product. The inverse market demand equation is P = 100 − 2Q. The total cost equations for firms 1 and 2 are TC1 = 4Q1 and TC2 = 4Q2, respectively. 9. Refer to SCENARIO 3. Suppose that the two firms are Cournot rivals. Firm 1’s reaction function is: a. Q1 = 12 − Q2. b. Q1 = 12 − 0.25Q2. c. Q1 = 24 − 0.5Q2. d. Q1...
Consider a market with 2 identical firms (a and b). The market demand is P =...
Consider a market with 2 identical firms (a and b). The market demand is P = 14 - Q where Q = Qa + Qb. For both firms AC=MC= 2. A. Solve for the Cournot-Nash reaction functions of each firm. B. Solve for the Cournot- Nash equilibrium. Solve for Q, Qa, Qb, Price, and each firms profit. C. Compare the Cournot-Nash equilibrium with perfect competition, and monopoly (you can refer to your results from question 2, if you’ve already done...
Consider a market with 2 identical firms (a and b). The market demand is P =...
Consider a market with 2 identical firms (a and b). The market demand is P = 14 - Q where Q = Qa + Qb. For both firms AC=MC= 2. A. Solve for the Cournot-Nash reaction functions of each firm. B. Solve for the Cournot- Nash equilibrium. Solve for Q, Qa, Qb, Price, and each firms profit. C. Compare the Cournot-Nash equilibrium with perfect competition, and monopoly (you can refer to your results from question 2, if you’ve already done...
Suppose there are two firms in the market. Let Q1 be the output of the first...
Suppose there are two firms in the market. Let Q1 be the output of the first firm and Q2 be the output of the second. Both firms have the same marginal costs: MC1 = MC2 = $5 and zero fixed costs. The market demand curve is P = 53 − Q. (a) (6 points) Suppose (as in the Cournot model) that each firm chooses its profit-maximizing level of output assuming that its competitor’s output is fixed. Find each firm’s reaction...
The market demand function is Q=10,000-1,000p. Each firm has a marginal cost of m=$0.16. Firm 1,...
The market demand function is Q=10,000-1,000p. Each firm has a marginal cost of m=$0.16. Firm 1, the leader, acts before Firm 2, the follower. Solve for the Stackelberg-Nash equilibrium quantities, prices, and profits. Compare your solution to the Cournot-Nash equilibrium. The Stackelberg-Nash equilibrium quantities are: q1=___________ units and q2=____________units The Stackelberg-Nash equilibrium price is: p=$_____________ Profits for the firms are profit1=$_______________ and profit2=$_______________ The Cournot-Nash equilibrium quantities are: q1=______________units and q2=______________units The Cournot-Nash equilibrium price is: p=$______________ Profits for the...
1) Suppose the monopoly has broken up into two separate companies. The demand function is P=105-3Q....
1) Suppose the monopoly has broken up into two separate companies. The demand function is P=105-3Q. The firms do not collude and the firms have identical marginal cost functions (MC1=MC2=40.). Also assume they are Cournot duopolists. Determine the quantity and price of each firm. Quantity for firm 1: ________ Quantity for firm 2: ________ Price in each market: $_________ 2) Now assume these firms are acting like Bertrand duopolists. What quantity will each firm produce and what will be the...
Suppose a drug manufacturer sells a new drug for twitchy feet. The market demand curve for...
Suppose a drug manufacturer sells a new drug for twitchy feet. The market demand curve for the drug is P=110-2Q, where P is the market price and Q is the market quantity. Also suppose the marginal cost for manufacturing is 10/ unit. A) Assuming the firm is an unregulated monopolist, what quantity and price should the firm offer? Quantity =. Price = $ B) Now suppose, the manufacturer has identified two separate classifications of cusC) Suppose the monopoly has broken...
1. Consider a market with inverse demand P (Q) = 100 Q and two firms with...
1. Consider a market with inverse demand P (Q) = 100 Q and two firms with cost function C(q) = 20q. (A) Find the Stackelberg equilibrium outputs, price and total profits (with firm 1 as the leader). (B) Compare total profits, consumer surplus and social welfare under Stackelberg and Cournot (just say which is bigger). (C) Are the comparisons intuitively expected? 2. Consider the infinite repetition of the n-firm Bertrand game. Find the set of discount factors for which full...
Consider a market with two firms whose products are identical. The market demand curve is p...
Consider a market with two firms whose products are identical. The market demand curve is p = a − bq where a > 0 and b > 0, and where q = q1 + q2. Firm i’s profits are πi(q1, q2) = pqi − cqi . Assume that the firms move in sequence, with firm 1 choosing q1 first, and then firm 2 choosing q2; however, assume firm 2 observes q1 before choosing q2. (a) What is a Nash equilibrium...
2. Consider two identical firms in a Cournot competition. The market demand is P = a...
2. Consider two identical firms in a Cournot competition. The market demand is P = a – bQ. TC1 = cq1 = TC2 = cq2 . a. Find the profit function of firm 1. b. Maximize the profit function to find the reaction function of firm 1. c. Solve for the Cournot-Nash Equilibrium. d. Carefully discuss how the slope of the demand curve affects outputs and price.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT