Consider a noncollusive duopoly model with both firms supplying bottled drinking water. The marginal cost for each firm is $1.50. The market demand is shown by the figure on the right. Let us assume that the two firms supplying bottled drinking water are Firm A and Firm B. The price charged by Firm A is denoted as PA and the price charged by Firm B is denoted as PB- Find the demand functions for each of the firms. If PA S$5, then demand for Firm A's bottled drinking water is: thousand if PA PB thousand if PA PB thousand if PA > PB If pg $5, then demand for Firm B's bottled drinking water is: thousand if PB PA C Price 10- 9- 8- 7- 6- 5- 4- 3- 2- 1- 0- 0 0.5 1 Demand 1.5 2 2.5 3 3.5 Quantity (in thousands) 4 4.5

Consider a noncollusive duopoly model with both firms supplying bottled drinking water. The marginal cost for each firm is $1.50. The market demand is shown by the figure on the right. Let us assume that the two firms supplying bottled drinking water are Firm A and Firm B. The price charged by Firm A is denoted as PA and the price charged by Firm B is denoted as PB- Find the demand functions for each of the firms. If PA S$5, then demand for Firm A's bottled drinking water is: thousand if PA PB thousand if PA PB thousand if PA > PB If pg $5, then demand for Firm B's bottled drinking water is: thousand if PB PA C Price 10- 9- 8- 7- 6- 5- 4- 3- 2- 1- 0- 0 0.5 1 Demand 1.5 2 2.5 3 3.5 Quantity (in thousands) 4 4.5

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.6P

See similar textbooks

Similar questions

What is the homogeneous-good duopoly Cournot equilibrium if the market demand function is Q= 1,800 - 1,000p. and each firm's marginal cost is $0.28 per unit? The Cournot-Nash equilibrium occurs where q, equals and 92 equals (Enter numenic responses using real numbers rounded to two decimai places.) Furthermore, the equilibrium occurs at a price of $ (Round your answer to the nearest penny.)
Problem 1. HHI in the Bertrand Triopoly Equilibrium It's a Bertrand Triopoly - hence we know there are 3 firms in the industry-in-question, who competes in "price". The inverse demand functions for Firm 1, 2, and 3 are as follows: q1 = 40 - 1.5p1 +0.5p2 +p3 q2 = 40 + 1.5p1 - 3p2+p3 q3 = 40 + 2p1 + 1.5p2 - 4p3 For each firm, the marginal cost of production is $2.50/unit produced and sold. Apparently, the firms' products are differentiated. You cannot impose symmetry across firms. Therefore, please solve each firm's profit maximization problem, impose equilibrium, and solve for each firm's "action" in equilibrium. After that, please calculate the Herfindahl- Hirschman Index (HHI) in the industry in equilibrium.
1. Consider two duopolists who each have a constant marginal cost c = e2 = 3 and face inverse demand P = 15 – Q,where Q = Q1 + Q2 is the total output of both firms. 1. Find the Cournot equilibrium quantity for each firm, the resulting market price, and the profits for each firm. 2. Find the Stackelberg equilibrium quantities for each firm, and the price, and the profits for each firm supposing that Firm 1 is the industry leader. 3. Suppose that Firm 2 figures out a way to lower its marginal cost to ez = 0 while firm 1 still has a marginal cost equal to 1: c = 3. How does this affect the Cournot equilibrium quantities, price, and profits? 4. How does this affect the Stackelberg equilibrium (with Firm 1 still as the leader) quantities, price, and profits?
1. Best responses in a Cournot Oligopoly Firm A and Firm B sell identical goods Total market demand for the good is: The inverse demand function is therefore 1 P(QM) = 780 -Q=780 -0.02222QM 45 QM is total market production (i.e., combined production of firm's A and B. That is: Q(P) = 35, 100- 45P 2M = A +QB As a result, the inverse demand curve for each firm is: P(QA, QB) = 780- -1/32₁-752 45 Unlike the example in class, the two firms have different costs. = 4000A TCA (QA) TCB (QB) = 260QB = 780 -0.022220A -0.02222QB a. Using the demand function and the cost functions above, what is firm A's profit function. b. Using the profit function above and assuming that firm B produces Qg, calculate what firm A's best response is to firm B’s decision to produce QB- Note: Firm A's best response should be a function of B
Consider a duopoly with a demand curve given by P = a –bQ, where a and b are positive constants and Q is the total production by the two firms. Firms sell identical goods and have an identical constant marginal cost of production c. Fixed costs are equal to zero. We assume firms choose quantities simultaneously (Cournot competition). a. Obtain the first order condition of profit maximization for each firm. Use graphical analysis and economic intuition to explain what they represent. [30%] b. Obtain the profit maximizing quantity for each firm. Explain what they represent using game theory concepts. [20%] c. Demonstrate using relevant graphical analysis and economic intuition that the results obtained in b are not a Pareto Optimum for the firms involved. [20%] d. How would the graphical analysis in part a change if Firm A had a fixed cost of production?
Help me please
Consider the Cournot duopoly with linear demand function ? = 2000 − 2Q, where P is the price and Q = q1 + q2 is the total supply. Firm 1 and firm 2 has constant marginal cost of 600. Just answer the E, F and G, thank you bartleby! a. If firm compete in price, draw in detail the best response of each firm.b. Determine and explain the Bertrand equilibrium.c. What is the equilibrium quantity and how much profit for each firm?d. Explain the Bertrand Paradox in (c)!e. If firm 1 has capacity of production 450 and firm 2 has capacity of 200. Determine the Bertrand equilibrium.f. What is the equilibrium quantity, and how much profit for each firm?g. Is there any paradox in (f)?
1. Two firms (A and B) play a competition game (i.e. Cournot) in which they can choose any Qi from 0 to ¥. The firms have the same cost functions C(Qi) = 10Qi + 0.5Qi2, and thus MCi = 10 + Qi. They face a market demand curve of P = 220 – (QA + QB). a. Assume firm A chooses quantity first. Frim B observes this choice and then chooses its own quantity. What is Frim B's profit as a function of QA and QB? b. Firm B has MRB = 220 – 2QB – QA. What is firm B’s best response to an arbitrary QA selected by firm A? c. Given that firm A expects firm B’s best response, what is firm A’s profit as a function of QA? (Hint: the only unknown variable in the profit function should be QA) d. Firm A has MRA = 150 – 4QA/3. What are the equilibrium QA and QB selected in this game? e. What is the equilibrium price, and how much profit does each firm collect?
There are two firms in the market (duopoly). These two firms are competingsimultaneously. The first firm chooses its output level (x) by predicting the second firm’soutput (y). Let c denote the total cost function c(x) = x and c(y) = y. Also, let’s assumethat the inverse demand function is p(Y) = 7 - Y where Y = x + y. (1) Obtain the reactionfunction of the first firm. (2) Find the equilibrium (output and profit of each firm) whentwo firms simultaneously compete
bok rint An oligopoly producing a homogeneous product is comprised of three firms that act like a cartel. Assume that these three firms have identical cost schedules. Assume also that if any one of these firms sets a price for the product, the other two firms charge the same price. As long as they all charge the same price they will share the market equally; and the quantity demanded of each will be the same. Below is the total-cost schedule of one of these firms and the demand schedule that confronts it when the other firms charge the same price as this firm. Complete the marginal-cost and marginal- revenue schedules facing the firm. erences Mc Graw Hill Output Total cost Marginal cost Price Quantity demanded Marginal revenue 0 1 23456 7 8 $0 180 300 480 720 1,020 1,380 1,800 2,280 Short Anewor LA JUL 26 $780 720 660 600 540 480 420 360 Toolbar navigation (a) What price would be charged, what output would be produced, and what profit would be made by this firm? (b) If the firms…
SUB-SECTION B2 13 Electra and Luminux are the only two firms who provide electricity in a local market as a Cournot duopoly. The electricity provided by the two firms is identical and consumers are indifferent about which firm they will purchase electricity from. The market inverse demand for electricity is P = 100 - 2Q, where is the aggregate quantity of electricity produced by the two firms, qe qL. Electra has a marginal cost of 12, while Luminux has a marginal cost of 20. Assume that neither firm has any fixed costs. (a) Determine each firm's reaction curve and graph it. How much electricity will each firm produce in a Cournot equilib- rium? (c) What will the market price for electricity be? How much profit does each firm make? (e) Suppose now that the two firms move sequentially with one of them acting as a Stackelberg leader. Do you expect the outcome to the closer to perfect competition when Electra, or when Luminux, moves first? Explain your answer.
Two firms produce and sell differentiated products that are substitutes for each other. Their dernand curves are Firm 1:Q, 40-3P,+ P, Firm 2: 0, - 40 - 3P,+ P, Bolh firms have constant marginal costs of $5.00 per unit. Both fims set their own price and take their competitor's price as fixed. Use the Nash equilibrium concept to determine the equiltbirium set of prices. Since Ihe firms ane identical, they wil set the same prices and produce the same quantities. In equibrium, each firm will charge a price of 8 and produce units of output. (Enter your responses rounded to wo decimal places)