Assume firms' marginal and average costs are constant and equal to c and that inverse market demand isgiven by P = a - bQ where a, b > 0. Suppose now the market is served by k firms that choose quantitiesfor their identical products simultaneously. Calculate:i.ii.iii.iv.The Nash equilibrium quantities for the Cournot firms as functions of k. 2Market output and price as a function of kFirm profit as a function of kUsing your answers in i, ii, iii and iv, describe what happen to firm output, market output,market price and firm profit as the number of firms increases.

Since you have posted a question with multiple sub parts, we will provide the solution only to the…

Assume firms' marginal and average costs are constant and equal to c and that inverse market demand is given by P = a-bQ where a, b > 0. Suppose now the market is served by k firms that choose quantities for their identical products simultaneously. Calculate: The Nash equilibrium quantities for the Cournot firms as functions of k. 2 Market output and price as a function of k Firm profit as a function of k

Assume firms' marginal and average costs are constant and equal to c and that inverse market demand is given by P = a-bQ where a, b > 0. Suppose now the market is served by k firms that choose quantities for their identical products simultaneously. Calculate: The Nash equilibrium quantities for the Cournot firms as functions of k. 2 Market output and price as a function of k Firm profit as a function of k

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.4P

See similar textbooks

Similar questions

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?
Please help me ASAP. I will really appriciate it. Thank you Assume a Nash-Cournot equilibrium. How much output does firm 1 produce? Assume a Nash-Cournot equilibrium and no fixed cost. How much profit does firm 2 make? Now assume a collusive equilibrium. What is firm 1's output?
Two firms with differentiated products are competing in price. Firm A and B face thefollowing demand curves: Q_A = 70 − 2P_A + P_B and Q_B = 120 − 2P_B + P_Arespectively. Assume production is costless.a. Give equations for and graph each firm’s reaction curve.b. If both firms set their prices at the same time, what is the Nash equilibriumprice, quantity, and profit for each firm?c. Suppose A sets its price first and then B responds. What price and quantitydoes each firm set now? Is it advantageous to move first?d. Compare the profits from part b and c. Which firm benefits more from thesequential price choosing? (Please do b-d, thanks :))
Firms J and K produce compact-disc players and compete againstone another. Each firm can develop either an economy player (E)or a deluxe player (D). According to the best available marketresearch, the firms’ resulting profits are given by the accompanyingpayoff table.a. The firms make their decision independently, and each is seeking itsown maximum profit. Is it possible to make a confident predictionconcerning their actions and the outcome? Explain.Firm KE DE 30, 55 50, 60 Firm JD 40, 75 25, 50b. Suppose that firm J has a lead in development and so can move first.What action should J take, and what will be K’s response?c. What will be the outcome if firm K can move first?
5. Suppose there are two firms in a Cournot type setting (choosing quantity simultaneously). How would an increase in the marginal cost of firm 1 change the equilibrium output of firm 1 and firm 2? Depict your answer graphically.
Refer to the figure at right. Two firms operating in the same market must choose between a collude price and a cheat price. Firm A's profit is listed before the comma, B's outcome after the comma. If each firm tries to choose a price that is best for it, regardless of the other firm's price, which of these statements is correct? O A. Both firms should charge a cheat price. OB. Firm A should charge the collude price; Firm B should charge a cheat price. C. D. Both firms should charge a collude price. Firm A should charge a cheat price; Firm B should charge a collude price. Cheat Price Firm A Firm B Cheat Price Collude Price Collude Price 18, 18 6,30 30,6 24, 24
Under Bertrand competition, O the Nash equilibrium is marginal cost pricing (the perfectly competitive outcome) O the Nash eqt Nibrium is monopoly pricing there are multiple Nash equilibria O there is no set of strategies that lead to a Nash equilibrium
Suppose that in the market for cell phone service the number of competitors has dwindled until D & C Romer Net and Spa T. Wireless have become the only providers left in the nation. Seeking to boost their profits, the two companies secretly agree to a coordinated increase in their prices for cell phone minutes. This practice is known as a Nash equilibrium. O tying. collusion. antitrust. predatory pricing.
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
Kate and Alice are small-town ready-mix concrete duopolints. The market demand tunction is o- 20,000 - 200Pwhere Pis the price of a cubic yard of concrete and Ois the number of cubic yards demanded per year. Marginal cost is sa0 per cubic yard. Suppose Kate onters the market first and chooses her output belore Alice. What is the difference in Alice's profit when Kata enters the market tirst, compared to when they simultanecusly select ther outputa? When Kate entors the markat first, Alice's profit is $3,888.a0 lower. O When Kate enters the market fest, Alice's profit is 513,333.33 lower. O When Kate enters the market first, Alice's profit is $5,000 lower. O When Kate onters the market first, Alice's proft is $1.111.11 higher,
Think about firms such as the Coca Cola Company and PepsiCo who competeagainst each other in the monopolistically competitive market for soft drinks. Eachfirm produces a unique product, but each of these unique products is to some extenta substitute for the soft drinks produced by rival companies.Now imagine a situation where the firms within such a market are facing suchextreme competition that they are unable to make an operating profit. Characterisethis situation diagrammatically and explain what will happen to the market, payingparticular attention to the exit or entry of firms out of (or into) the market.
Let ci be the constant marginal and average cost for firm i (so that firms may have different marginal costs). Suppose demand is given by P=1-Q. Calculate the Nash equilibrium quantities assuming there are two firms in a Cournot market. Also compute market output, market price, firm profits, industry prof- its, consumer surplus, and total welfare. Represent the Nash equilibrium on a best-response function diagram. Show how a reduction in firm 1’s cost would change the equilibrium. Draw a representative isoprofit for firm 1.