Question

Consider a Stackelberg game of quantity competition between two firms. Firm 1 is the leader and...

Consider a Stackelberg game of quantity competition between two firms. Firm 1 is the leader and firm 2 is the follower. Market demand is described by the inverse demand function P = 1000 − 4Q. Each firm has a constant unit cost of production equal to 20.

a) Solve for Nash equilibrium outcome.

b) Suppose firm 2’s unit cost of production is c< 20. What value would c have so that in the Nash equilibrium the two firms, leader and follower, had the same market share?

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
Assume there are two firms in a Stackelberg game. Firm 1 chooses its output first and...
Assume there are two firms in a Stackelberg game. Firm 1 chooses its output first and Firm chooses its output after knowing what Firm 1’s output is. Market demand is given by P = 1,000 – 4Q. Each firm has identical marginal cost of 100. Determine the Nash equilibrium for this game.
1. Consider the Leader-Follower game in which two firms each choose a quantity qi to bring...
1. Consider the Leader-Follower game in which two firms each choose a quantity qi to bring to the market, but in sequence. Firm 1 chooses q1, and then being informed of q1, firm w then chooses q2. The market has an inverse demand function P(Q) = 100 - Q, where Q = q1 + q2. Assume each firm has a constant marginal cost of 10. (a) Solve by backward induction, state complete contingency plans for both firms. (b) Compute the...
Two firms, firm 1 & firm 2, in a Stackelberg sequential duopoly are facing the market...
Two firms, firm 1 & firm 2, in a Stackelberg sequential duopoly are facing the market demand given by P = 140 – 0.4Q, where P is the market price and Q is the market quantity demanded. Firm 1 has (total) cost of production given by C(q1) = 200 + 15q1, where q1 is the quantity produced by firm 1. Firm 2 has (total) cost of production given by C(q2) = 200 + 10q2, where q2 is the quantity produced...
Consider two firms, Firm A and Firm B, who compete as duopolists. Each firm produces an...
Consider two firms, Firm A and Firm B, who compete as duopolists. Each firm produces an identical product. The total inverse demand curve for the industry is ? = 250 − (?? + ?? ). Firm A has a total cost curve ?? (?? ) = 100 + ?? 2 . Firm B has a total cost curve ?? (?? ) = 100 + 2??. a. Suppose for now, only Firm A exists (?? = 0). What is the Monopoly...
Two firms compete as a Stackelberg duopoly. Firm 1 is the market leader. The inverse market...
Two firms compete as a Stackelberg duopoly. Firm 1 is the market leader. The inverse market demand they face is P = 62 - 2Q, where Q=Q1+Q2. The cost function for each firm is C(Q) = 6Q. Given that firm 2's reaction function is given by Q2 = 14 - 0.5Q1, the optimal outputs of the two firms are: a. QL = 9.33; QF = 9.33. b. QL = 14; QF = 7. c. QL = 6; QF = 3....
Question 4 Consider the following game. Firm 1, the leader, selects an output, q1, after which...
Question 4 Consider the following game. Firm 1, the leader, selects an output, q1, after which firm 2, the follower, observes the choice of q1 and then selects its own output, q2. The resulting price is one satisfying the industry demand curve P = 200 - q1 - q2. Both firms have zero fixed costs and a constant marginal cost of $60. a. Derive the equation for the follower firm’s best response function. Draw this equation on a diagram with...
Consider an industry consisting of two firms producing an identical product. The inverse market demand equation...
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. Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg follower. The profit of the Stackelberg follower is: $864. $576. $432. $288. $1,152.
Consider an industry consisting of two firms producing an identical product. The inverse market demand equation...
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. Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg follower. The output of the Stackelberg follower is: 6. 12. 24. 48. None of the above.
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...
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. Refer to SCENARIO 3. Firm 1 is the Stackelberg leader and firm 2 is the Stackelberg follower. The profit of the Stackelberg leader is: a. $288. b. $432. c. $486. d. $576. e. None of the above.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT