ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
expand_more
expand_more
format_list_bulleted
Related questions
Question
Consider a Bertrand duopoly. Market demand is P(Q)=41-3Q, and each firm faces a marginal cost of $4 per unit. How much is the sum of firms' total revenue in the Nash equilibrium?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by stepSolved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- There are two firms in a market and they compete in a Nash-Cournot manner. Firm 1 faces the demand function p1(g1,92) = 200 - 91 - 92, and has a total cost function TC1 = (91)2. Firm 2 faces the demand function p2(91,92) = 160 - 92 - 91, and has a total %3D cost function TC2 = (92)2. Answer each of the following questions. a. Find the Nash-Cournot equilibrim output and price v for firm 1. b. Find the Nash-Cournot equilibrim output v and price v for firm 2.arrow_forward2. Four firms (A, B, C, and D) play a pricing game (i.e. Bertrand). Each firm (i) may choose any price Pi from 0 to ¥, with the goal of maximizing its own profit. Firms A and B have MC = 10, while firms C and D have MC = 20. The firms serve a market with the demand curve Q = 100 – P. All firms produce exactly the same product, so consumers purchase only from the firm with the lowest price. If multiple firms have the same low price, consumers divide their quantities evenly among the low-priced firms. Assume the firms choose price simultaneously. a. There are many equilibria in this simultaneous-move pricing game. Provide one equilibrium combination of prices, and argue that no firm has a unilateral incentive to deviate from these prices. Now assume firm A chooses price first. Firm B observes this choice and then chooses its own price second. Firm C chooses price third, and firm D chooses price last. b. Again, there are many equilibria in this sequential-move pricing game.…arrow_forwardThe demand for a product is Q = a - P/2. If there are 4 firms in an industry and marginal cost is MC = 20, then the price in Nash equilibrium is P = 56. What is a?arrow_forward
- Two firms are engaged in Cournot (simultaneous quantity) competition. Market-level inverse demand is given by P = 160 − 4Q Firm 1 has constant marginal costs of MC1 = 8, while Firm 2 has constant marginal costs of MC2 = 24. 1) Does there exist a low enough positive marginal cost for firm 1 such that firm 1 acts like a monopoly in this market, if so what is the MC if not why?arrow_forwardI have constructed a Bertrand game (competition in prices) and presented you with the reaction functions of each firm. p1 = 12.5 + p2/4 p2 = 5/2 + p1/2 a) Use excel to draw the reaction functions. b) Solve for the Nash equilibriumarrow_forwardSuppose there are just two firms, 1 and 2, in the oil market and the inverse demand for oil is given by P = 60 – Q. The marginal cost for each firm is €30. What price should Firm 2 charge at the Cournot equilibriumarrow_forward
- QUESTION 13 Consider a market where two firms (1 and 2) produce differentiated goods and compete in prices. The demand for firm 1 is given by D₁(P₁, P2) = 140 - 2p1 + P2 and demand for firm 2's product is D2 (P1, P2) 140 - 2p2 + P1 Both firms have a constant marginal cost of 20. What is the Nash equilibrium price of firm 1? (Only give a full number; if necessary, round to the lower integer; no dollar sign.)arrow_forwardI have constructed a Bertrand game (competition in prices) and presented you with the reaction functions of each firm. P2 P1 = 12.5 + 4 P1 P2 == Use excel to draw the reaction functions. Solve for the Nash equilibrium + n INarrow_forwardConsider a Bertrand oligopoly where two firms (Firms 1 and 2) sell goods that are imperfectsubstitutes and compete by choosing prices simultaneously. Their market demands areq!= 1,200 − 3/2p!+ 3/2p", q"= 800 − 2p"+ 1/2p!For simplicity, assume the marginal cost is zero for both firms (MC!= MC"= 0). Find the bestresponse curve of each firm. Which of the following alternatives is correct?(a) Firm 1’s best response curve is p!= 400 + 0.5p"(b) Firm 2’s best response curve is p"= 400 + 0.5p!(c) Firm 1’s best response curve is q!= 45 − 0.5q"(d) Firm 2’s best response curve is q"= 200 + 0.8p! Then, find the optimal price and quantity of each firm.Hint: Start by finding the Nash equilibrium, that is, the combination of mutual best responses.Which of the following alternatives is correct?(a) For firm 1, p!= $1,600/3 and q!= 800/3(b) For firm 1, p!= $800 and q!= 1,600/3(c) For firm 2, p"= $800 3⁄ and q"= 1,600/3(d) For firm 2, p"= $1,600 and q"= 800 key: !=1 "=2arrow_forward
- Consider the following oligopolistic market. In the first stage, Firm 1 chooses quantity q1₁. Firms 2 and 3 observe Firm 1's choice, and then proceed to simultaneously choose 92 and 93, respectively. Market demand is given by p(Q) = 100 – · Q, and Q = 9₁ +92 +93. Firm 1's costs are c₁ (9₁) = 591, firm 2's costs are c₂ (92) = 492 and firm 3's costs are C3 (93) = 493. C2 Starting from the end of the game, you can express Firm 2's best response function in terms of 9₁ and 93, and you can similarly express Firm 3's best response function in terms of 9₁ and 92. Using these, answer the following questions. If rounding is needed, write your answers to 3 decimal places. a) If Firm 1 chooses q₁ = 3, what quantity will Firm 2 choose? b) If Firm 1 chooses 9₁ = 100, what quantity will Firm 2 choose? c) In the subgame perfect Nash equilibrium of this game, firm 1 produces what quantity? d) In the subgame perfect Nash equilibrium of this game, firm 2 and firm 3 each produce what quantity?arrow_forwardConsider a Cournot duopoly. The market demand function is P = 112-1(q1 + q2), where P is the market price, q1 is the output produced by Firm 1 and q2 is the output produced by Firm 2. The two firms have a constant marginal cost c = 17. What is Firm 2's profit ? Round your answer to the nearest integer (e.g. 50)arrow_forwardConsider a Bertrand duopoly where market demand is P(Q)=107-5Q. Each firm faces a marginal cost $18 and no fixed cost. what is one market price that can occur in a Nash equilibrium?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education