Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Chapter 10, Problem 17SQ
To determine
The
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Consider the following Cournot model.
• The inverse demand function is given by p = 30 –Q, where Q
qi + q2.
Firm 1's marginal cost is $6 (c1 = 6). Firm 2 uses a new
technology so that its marginal cost is $3 (c2 = 3). There is no
fixed cost.
%3D
The two firms choose their quantities simultaneously and
compete only once. (So it's a one-shot simultaneous game.)
Dell and Sony compete primarily by price. Each firm must choose either a high price or a low price simultaneously. Use the following information to create the profit matrix:
If Dell and Sony both set high prices, Dell’s profit is $40 million and Sony’s profit is $35 million.
If Dell sets high price and Sony sets low price, Dell’s profit is $25 million and Sony’s profit is $40 million.
If Dell sets low price and Sony sets high price, Dell’s profit is $50 million and Sony’s profit is $10 million.
If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million.
Please answer the following questions:
Does Sony have a dominant strategy? Dell? If so, which one?
If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix?
Instead, if Dell and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.
Dell and Sony compete primarily by price. Each firm must choose either a high price or a low price simultaneously. Use the following information to create the profit matrix:
If Dell and Sony both set high prices, Dell’s profit is $40 million and Sony’s profit is $35 million.
If Dell sets high price and Sony sets low price, Dell’s profit is $25 million and Sony’s profit is $40 million.
If Dell sets low price and Sony sets high price, Dell’s profit is $50 million and Sony’s profit is $10 million.
If Dell and Sony set low prices, Dell has $20 million and Sony has $15 million.
Please answer the follow questions:
Does Sony have a dominant strategy? Dell? If so, which one?
If Dell and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix?
Instead, if Dell and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.
Chapter 10 Solutions
Micro Economics For Today
Ch. 10.1 - Prob. 1YTECh. 10.5 - Prob. 1GECh. 10.6 - Prob. 1YTECh. 10 - Prob. 1SQPCh. 10 - Prob. 2SQPCh. 10 - Prob. 3SQPCh. 10 - Prob. 4SQPCh. 10 - Prob. 5SQPCh. 10 - Prob. 6SQPCh. 10 - Prob. 7SQP
Ch. 10 - Prob. 8SQPCh. 10 - Prob. 9SQPCh. 10 - Prob. 10SQPCh. 10 - Prob. 11SQPCh. 10 - Prob. 12SQPCh. 10 - Prob. 13SQPCh. 10 - Prob. 1SQCh. 10 - Prob. 2SQCh. 10 - Prob. 3SQCh. 10 - Prob. 4SQCh. 10 - Prob. 5SQCh. 10 - Prob. 6SQCh. 10 - Prob. 7SQCh. 10 - Prob. 8SQCh. 10 - Prob. 9SQCh. 10 - An oligopoly is a market structure in which a. one...Ch. 10 - Prob. 11SQCh. 10 - A common characteristic of oligopolies is a....Ch. 10 - Prob. 13SQCh. 10 - Prob. 14SQCh. 10 - Prob. 15SQCh. 10 - Prob. 16SQCh. 10 - Prob. 17SQCh. 10 - Prob. 18SQCh. 10 - Prob. 19SQCh. 10 - The kinked oligopoly demand curve is a result of...
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- Explain in few lines Three firms are competing through prices (Bertrand competition). They are all selling the same products. The only difference is that the first two firms have a constant marginal cost equal to 2 while the third firm has a constant marginal cost equal to 5. In equilibrium the two firms with lower marginal cost will set their price just slightly below 5arrow_forwardHP and Sony compete primarily by price. Each firm must choose either a high price or a low price simultaneously. Use the following information to create the profit matrix: If HP and Lenovo both set high prices, HP’s profit is $40 million and Sony’s profit is $35 million. If HP sets high price and Sony sets low price, HP’s profit is $25 million and Sony’s profit is $40 million. If HP sets low price and Sony sets high price, HP’s profit is $50 million and Sony’s profit is $10 million. If HP and Sony set low prices, HP has $20 million and Sony has $15 million. Please answer the follow questions: Does Sony have a dominant strategy? HP? If so, which one? If HP and Sony maximize their profits non-cooperatively, what is the Nash-equilibrium for this profit matrix? Instead, if HP and Sony maximize their joint profits cooperatively, what is the equilibrium? Assume they keep their agreements.arrow_forwardpic 1 : A small town is served by many competing supermarkets, which all have the same constant marginal cost. Use the black point (plus symbol) to show the competitive price and quantity in this market. Then use the green area (triangle symbol) to shade the area representing consumer surplus in the market for groceries, and use the purple area (diamond symbol) to shade the area representing producer surplus. pic 2 : Now suppose that the independent supermarkets combine into one chain. Use the black point (plus symbol) to show the profit-maximizing monopoly outcome. Then use the green area (triangle symbol) to shade the area representing consumer surplus in the market for groceries, and use the purple area (diamond symbol) to shade the area representing producer surplus. Finally, use the black area (plus symbol) to shade the area representing deadweight loss. Which of the following statements is true about the changes that occur after the supermarkets merge?…arrow_forward
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