ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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How does it go from qi = (1 - q1 - q2 - ... - qn - c)/2 to q = (1 - cq)/(n + 1) via the substitution in the last step?
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How does it go from qi = (1 - q1 - q2 - ... - qn - c)/2 to q = (1 - cq)/(n + 1) via the substitution in the last step?
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- Q4arrow_forwardProblem 3 Consider the infinitely repeated game with the discount factor & € (0, 1) of the following Cournot duopoly model with inverse demand function P(Q) = a Q if Q≤ a 0 if Q > a where Q = 91 +92 and cost functions Ci(qi) = cqi, i = 1,2. The profit function of firm i is given by Ti (91, 92) = qiP(9₁ +92) - cqi. Consider the following grim-trigger strategy. Produce half the monopoly output in the first period and as long as everybody has produced that amount so far. Otherwise produce the Cournot output. Verify that this is a subgame perfect equilibrium.arrow_forwardYou are given the market demand function Q= 3400 – 1000p, and that each duopoly firm's marginal cost is $0.28 per unit, which implies the cost function: C(4:) = 0.28qi, assuming no fixed costs for i = 1, 2. The Cournot equilibrium quantities are q, and 92 (enter your responses as whole numbers).arrow_forward
- 3arrow_forwardTwo firms in a Cournat oligpoly each have the best response function, such that the optimal quantity for each individual firm to produce must satisfy the equation: Q-27-Q/2 What quantity Q will each firm produce in the market? Type your answer...arrow_forwardConsider a duopoly market with 2 firms. Aggregate demand in this market is given by Q = 500 – P, where P is the price on the market. Q is total market output, i.e., Q = QA + QB, where QA is the output by Firm A and QB is the output by Firm B. For both firms, marginal cost is given by MCi = 20, i=A,B. Assume the firms compete a la Cournot. What are the equilibrium quantities? What is the total quantity supplied on this market? What is the equilibrium price in this market?arrow_forward
- Select the correct statements. Note: Multiple correct, multiple selections. Topics covered: Stackelberg, Cournot, and Bertrand models. O A. Suppose the inverse market demand function is P (y) = a - by, and the marginal cost of each firm is K (same and constant). In this market, the market price will be higher if the market is a Stackelberg duopoly than the market price if it is a Cournot duopoly market. В. A Stackelberg leader will necessarily make at least as much profit as he would if he acted as a Cournot oligopolist. O C. Suppose, in a Stackelberg duopoly, the follower's output is measured on the horizontal axis. Profits to the follower will increase as we move to isoprofit lines that are further to the left. D. The equilibrium in Bertrand duopoly where both firms sell identical products is Pareto efficient. Е. In Cournot duopoly, if each firm has the same marginal MC = K, each firm produces the same level of output and earns the same profit.arrow_forwardConsider a Cournot oligopoly with two firms, where the demand curves are given by P, = 100-Q,-2Q2 P2= 100-2Q,-Q2 and that costs are given by TC(Q,) = Q'1. MC, = 2Q1, TC(Q2) = Q²2, and MC2 = 2Q2. Also, marginal revenues can be written as MR, = 100-2Q,-2Q2. MR2= 100- 2Q, - 2Q2. Solve for each firm's profit. Profit for firm 1= 600, Profit for firm 2= 300 Profit for firm 1= 300, Profit for firm 2= 600 Profit for firm 1= 555.55, Profit for firm 2= 555.55 O Profit for firm 1= 0, Profit for firm 2= 0arrow_forwardQUESTION 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_forward
- The firms in a duopoly produce differentiated products. The inverse demand for Firm 1 is The inverse demand for Firm 2 is and P₁ = 52-9₁-0.592. Each firm has a marginal cost of m= $1 per unit. Solve for the Nash-Cournot equilibrium quantities. The Cournot equilibrium quantities are (Enter your responses rounded to two decimal places.) P₂ = 100-92-0.5q1₁. 91 = units 92 units. =arrow_forwardSuppose 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.arrow_forward(4) Firm l's cost function is C1(q1) = q1 and firm 2's cost function is C2(q2) = 2q2. Consider a duopoly selling in a market with inverse demand function p = 12 q. (a) Assume firms choose output simultaneously (Cournot model). Compute the equilibrium quantities and the market price in a Nash equilibrium. (b) Now assume that firm 1 is a leader and chooses its output q1 first. Then, firm 2 chooses its output q2 after observing q1 (Stackelberg model). Find a subgame-perfect Nash equilibrium of this game. Carefully specify the strategies for firm 1 and firm 2. What quantities are produced in equilibrium and what is the market price in equilibrium?arrow_forward
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