Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 14, Problem 7Q
(a)
To determine
Residual
(b)
To determine
Nash
(c)
To determine
Nash equilibrium when the firm decides to collude.
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Students have asked these similar questions
Consider a noncollusive duopoly model with both firms
supplying bottled drinking water. The marginal cost for
each firm is $1.50. The market demand is shown by the
figure on the right.
Let us assume that the two firms supplying bottled drinking
water are Firm A and Firm B. The price charged by Firm A
is denoted as PA and the price charged by Firm B is
denoted as PB-
Find the demand functions for each of the firms.
If PA S$5, then demand for Firm A's bottled drinking
water is:
thousand if PA PB
thousand if PA = PB
thousand if PA > PB
If PB ≤ $5, then demand for Firm B's bottled drinking
water is:
thousand if PB PA
Price
10-
9-
8-
7-
6-
5-
4-
3-
2-
1-
0-
0
0.5
1
Demand
2 2.5 3 3.5
1.5
Quantity (in thousands)
4
4.5
Three firms compete in the style of Cournot. The inverse demand is P(Q) = a - Q. Scenario 1: All three firms have the same constant marginal cost MC = c. Scenario 2:
Firm 1 has MC = 0.5c, Firm 2 has MC = c, and Firm 3 has MC = 1.5c. Assume that a > 3c. Which of the following is correct? (Price means the price in Nash equilibrium.)
Price in scenario 1 > Price in scenario 2
Price in scenario 2 > Price in scenario 1
Price in scenario 1 = Price in scenario 2
Any of the first three options is possible depending on the value of a
Any of the first three options is possible depending on the value of a and c.
1.6. Consider the Cournot duopoly model where inverse demand
is P(Q) = a - Q but firms have asymmetric marginal costs: c₁
for firm 1 and c2 for firm 2. What is the Nash equilibrium if
0 a+c₁?
Chapter 14 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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