Question

Consider a Cournot duopoly operating in a market with inverse demand P(Q) = a - Q,...

Consider a Cournot duopoly operating in a market with inverse demand P(Q) = a - Q, where Q = q1 + q2 is the aggregate quantity on the market. Both firms have total costs ci(qi) = cqi, but demand is uncertain: it is High (a = aH) with probability theta and low (a= aL) with probability 1 - theta. Furthermore, information is asymmetric: firm 1 knows whether demand is high or low, but firm 2 does not. All this is common knowledge. What are the stategy spaces for the two firms? What is the Bayesian Nash Equilibrium of this game?
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
Consider the Cournot duopoly model where the inverse demand is P(Q) = a – Q but...
Consider the Cournot duopoly model where the inverse demand is P(Q) = a – Q but firms have asymmetric marginal costs: c1 for firm 1 and c2 for firm 2. What is the Nash equilibrium if 0 < ci < a/2 for each firm? What if c1 < c2 < a, but 2c2 > a + c1?
Consider the Cournot duopoly model where the inverse demand function is given by P(Q) = 100-Q...
Consider the Cournot duopoly model where the inverse demand function is given by P(Q) = 100-Q but the firms have asymmetric marginal costs: c1= 40 and c2= 60. What is the Nash equilibrium of this game?
There is a Cournot duopoly competition between Firm 1 and Firm 2. The inverse demand function...
There is a Cournot duopoly competition between Firm 1 and Firm 2. The inverse demand function is given by P(Q)=100-q, where Q=q1+q2 and qi denotes the quantity produced by firm i for all iÎ {1, 2} and the cost function is given by ci(qi)=10qi. Describe this problem as a normal-form game. Find pure-strategy Nash Equilibria for both firms.
Consider a duopoly with a Cournot competition. The demand of the market is Q=2-p. Both firm...
Consider a duopoly with a Cournot competition. The demand of the market is Q=2-p. Both firm 1 and firm 2’s marginal costs can take two values. For firm 1 it can be MC=5/4 with probability 1/3 and MC=3/4 with probability 2/3. For firm 2 it can be MC=5/4 with probability 2/3 and MC=3/4 with probability 1/3. Each firm knows its own MC but does not know the MC of the other firm. (But the probabilities are known to everyone.) What...
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 = 128 - 4Q. The cost function for each firm is C(Q) = 8Q. The price charged in this market will be a. $32. b. $48. c. $12. d. $56.
Suppose there are n firms in a Cournot oligopoly model. Let qidenote the quantity produced by...
Suppose there are n firms in a Cournot oligopoly model. Let qidenote the quantity produced by firm i, and let Q = q1 + q2 +…+ qn be the aggregate quantity in the market. Let P denote the market clearing price and assume that the inverse market demand is given by P(Q)=a - Q (when Q<a, else P=0). Assume that the total cost for firm i of producing quantity qi is C(qi) = cqi . That is, there are no...
What is the? homogeneous-good duopoly Cournot equilibrium if the market demand function is Q=1,600?400?p, and each?...
What is the? homogeneous-good duopoly Cournot equilibrium if the market demand function is Q=1,600?400?p, and each? firm's marginal cost is ?$0.28 per? unit? The? Cournot-Nash equilibrium occurs where q 1= and q 2= ?(Enter numeric responses using real numbers rounded to two decimal? places.)
A product is produced by two profit-maximizing firms in a Stackelberg duopoly: firm 1 chooses a...
A product is produced by two profit-maximizing firms in a Stackelberg duopoly: firm 1 chooses a quantity q1 ? 0, then firm 2 observes q1 and chooses a quantity q2 ? 0. The market price is determined by the following formula: P ( Q ) = 4 ? Q , where Q = q(1) +q(2) . The cost to firm i of producing q i is Ci( qi ) = q^2)i . (Note: the only difference between this problem and...
The inverse market demand in a homogeneous-product Cournot duopoly is P = 200 – 3(Q1 +...
The inverse market demand in a homogeneous-product Cournot duopoly is P = 200 – 3(Q1 + Q2) and costs are C1(Q1) = 26Q1 and C2(Q2) = 32Q2. a. Determine the reaction function for each firm. Firm 1: Q1 =  -  Q2 Firm 2: Q2 =  -  Q1 b. Calculate each firm’s equilibrium output. Firm 1: Firm 2: c. Calculate the equilibrium market price. $ d. Calculate the profit each firm earns in equilibrium. Firm 1: $ Firm 2: $
What is the homogeneous-good duopoly Cournot equilibrium if the market demand function is Q = 1,000...
What is the homogeneous-good duopoly Cournot equilibrium if the market demand function is Q = 1,000 - 1,000p, and each firm's marginal cost is $0.28 per unit? The Cournot-Nash equilibrium occurs where q 1 = ? and q 2 = ?. (Enter numeric responses using real numbers rounded to two decimal places.) Solve for q1 and q2 and determine the equilibrium price.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT