1. In the Bertrand model with product differentiation, suppose the two Bertrand Firms face thefollowing symmetric demand curves: q₁ = a - bip1 + b2P2 and 92 = abip2 + b₂P1. Assumeb1 b2 and 91.92 > 0. The cost function is C(q) = cq for each firm (or equivalently, MC =AC = c).a) Solve for each firm's best response function.b) Solve the Nash Equilibrium price and quantity.

In a Bertrand duopoly with differentiated products both the firm compete in prices by setting price…

1. In the Bertrand model with product differentiation, suppose the two Bertrand Firms face the following symmetric demand curves: q₁ = a - b₁p1 + b₂p2 and q2 = a - b₁p2 + b₂P₁. Assume b1 b2 and q1.92 > 0. The cost function is C(q) = cq for each firm (or equivalently, MC = AC = c). a) Solve for each firm's best response function. b) Solve the Nash Equilibrium price and quantity.

1. In the Bertrand model with product differentiation, suppose the two Bertrand Firms face the following symmetric demand curves: q₁ = a - b₁p1 + b₂p2 and q2 = a - b₁p2 + b₂P₁. Assume b1 b2 and q1.92 > 0. The cost function is C(q) = cq for each firm (or equivalently, MC = AC = c). a) Solve for each firm's best response function. b) Solve the Nash Equilibrium price and quantity.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

3
6. Suppose that identical duopoly firms have constant marginal costs of $10 per unit. Firm 1 faces a demand function of q1 = 100– 2p1+p2, where q1 is Firm l's output, pi is Firm l's price, and p2 is Firm 2's price. Similarly, the demand Firm 2 faces is q2 = 100– 2p2+P1. Solve for the NE.
PROBLEM IV. Consider an industry consisting of two firms (i = 1,2) that are engaged in a Bertrand price competition. The demand function for the product of firm i is given by qi = 24 – 9p; + 6p;. The marginal cost of production for each firm is zero. Q12. The collusive price of the products is (a) 4 (b) 5 (c) 1 (d) 6 (e) 2
Suppose the iceberg lettuce industry is a Cournot duopoly with two firms: Xtra Leafy (a) and Yummy Farms (y). Xtra Leafy produces q units of output and Yummy Farms produces qy units of output. Aggregate market output is Q = x + y. The (inverse) market demand schedule is: p = 176 - 2Q Both firms have identical cost structures: MC = MC₁ = ATC₂ = ATC₁ = $12 Find Xtra Leafy's Cournot reaction function of the form: 9x = a + bay Where "a" is the reaction function's intercept and "b" is its slope. Note: Please review the formatting instructions above. If any value is negative, be sure to include its negative sign. a. a= b. b = Hint: One of your answers will be negative. Think about why.
Q1: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q -----------------------------(1) - Firm B TC = 10 + 2Q -------------------------(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Question: Explain and draw the relationship between the zero-profit curve and the marginal cost curve for the two firms using the quantity schedule of the two firms and the relevant plots of equations (1) and (2) ? *Please draw diagram and answer asap*
Q1: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q -----------------------------(1) - Firm B TC = 10 + 2Q -------------------------(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Question: Use the zero profit, marginal cost curve and isoprofit curves valuing $. 34,000 and $ 60,000 on both firms to assess whether the higher isoprofit curves would always get closer to the average cost curve as quantity increases. Explain why or why not?
Q1: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q -----------------------------(1) - Firm B TC = 10 + 2Q -------------------------(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Question : Use the information given about firm A above and use appropriate diagrams/figures to explain how the equilibrium will change if it’s cost of production rises to $5?
Problem 3. Longer problem. Consider 2 firms F1 and F2 that produce identical products and have identical cost functions c₁ (31) = y2 and c₂ (y2) = y2. The demand function is p (yr) = 24 - yr where yry1 + y2 is the output produced by the two firms. i) Find a competitive equilibrium including the price, quantity and profit in which price = marginal cost. ii) Find the monopoly solution including the price, quantity and profit in which marginal revenue marginal cost. iii) Find the oligopoly (duopoly) Nash equilibrium including the price, quantity and profit in which both firms engage in Cournot competition. iv) Suppose that the oligopolists form a cartel and play a repeated game. Assume that they maximize infinite discounted profits for periods t = 0, 1, 0, ..., specifically, To ++ (1+r)² + .... The duopolists can remain in cartel forever and share the monopoly profit equally so each of them gets Tm 2 + 2 77m 2(1+r) 2(1+r)² cheating + + Alternatively, one of them can decide to break the…
Economics Consider a three-firm homogeneous product industry. The market demand function is X=1000-40P. The cost functions of the firms are: C1= 20X1, C2=13.5X2+0.075X22, and C3=16.3X3+0.005X32. Where, X=X1 + X2 + X3. 1. Explain the Firm's Cournot Behaviour. 2. Assuming the firms' practice on Cournot Behaviour, calculate the market price, outputs of the firms and their profits
2. Consider a standard Cournot triopoly model, i.e., inverse demand p(Q) = a - bQ, where Q = -19i and a, b>0, output cost function ci(qi) = cqi for i = 1, 2, 3, c> 0. qi (a) Find the symmetric equilibrium output (q*), price (p*), and profit levels (*). (b) Suppose that firms 1 and 3 merge horizontally, i.e., form a single larger firm, call it firm 1, and compete against firm 2 as in a Cournot duopoly. The newly formed firm 1 and firm 2 have identical cost functions, which are the ci(qi) discussed above, and face the same inverse market demand p(Q). Assume that firm 1 and firm 3 split equilibrium profits. Find for i = 1, 2, 3 and compare with part (a). Are firm 1 and firm 3 better-off after the merge?
Q1: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q -----------------------------(1) - Firm B TC = 10 + 2Q -------------------------(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Question : Use the information given about firm A above and use appropriate diagrams/figures to explain how the equilibrium will change if it’s cost of production rises to $5?*Please answer asap*
Q1: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q -----------------------------(1) - Firm B TC = 10 + 2Q -------------------------(2) Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000. Question: Use the information given above to assess whether the higher isoprofit curves would always get closer to the average cost curve as quantity increases. Explain why or why not? isoprofit curves valuing $. 34,000 and $ 60,000 on both firms