Question

In: Economics

Suppose there are two identical firms A and B facing a market demand P=100-2Q. Both firms...

  1. Suppose there are two identical firms A and B facing a market demand P=100-2Q. Both firms have the same marginal cost MC=4.

  1. Assume that firms are Cournot-competitors (in quantity). Find the equilibrium price, quantity and profits.
  2. Assume that firms are Stackelberg-competitors (in quantity) and Firm A is the leading firm. Find the equilibrium price, quantity and profits.
  3. What general conclusions can you derive from the answers that you found in (a) & (b)?

Solutions

Expert Solution


Related Solutions

Suppose there are two identical firms A and B facing a market demand P=280-2Q. Both firms...
Suppose there are two identical firms A and B facing a market demand P=280-2Q. Both firms have the same average and marginal cost AC=MC=40. Assume that firms are Cournot-competitors (in quantity). Find the equilibrium price, quantity and profits. Assume that firms are Stackelberg-competitors (in quantity) and Firm A is the leading firm. Find the equilibrium price, quantity and profits. What general conclusions can you derive from the answers that you found in (a) & (b)?
a.) Two identical firms compete as a Cournot duopoly. The market demand is P=100-2Q, where Q...
a.) Two identical firms compete as a Cournot duopoly. The market demand is P=100-2Q, where Q stands for the combined output of the two firms, Q=q1 +q2. The marginal cost for each firm is 4. Derive the best-response functions for these firms expressing what q1 and q2 should be. b.) Continuing from the previous question, identify the price and quantity that will prevail in the Cournot duopoly market c.) Now suppose two identical firms compete as a Bertrand duopoly. The...
In a duopoly market with two identical firms, the market demand curve is: P=50-2Q And the...
In a duopoly market with two identical firms, the market demand curve is: P=50-2Q And the marginal cost and average cost of each firm is constant: AC=MC=2 a. Solve for firm 1’s reaction curve and graph b. Solve for firm 2’s reaction curve and graph c. Solve for each firm’s Q and P in a cournot equilibrium and show on your graph i. What is the profit for each firm?
5. In a duopoly market with two identical firms, the market demand curve is: P=50-2Q And...
5. In a duopoly market with two identical firms, the market demand curve is: P=50-2Q And the marginal cost and average cost of each firm is constant: AC=MC=2 a. Solve for firm 1’s reaction curve and graph b. Solve for firm 2’s reaction curve and graph c. Solve for each firm’s Q and P in a cournot equilibrium and show on your graph i. What is the profit for each firm? 6. Now assume the same market demand curve as...
Consider two identical firms competing as Cournot oligopolists in a market with demand p(Q)=100-0.5Q. Both firms...
Consider two identical firms competing as Cournot oligopolists in a market with demand p(Q)=100-0.5Q. Both firms have total costs,TC=10q where 10 is the marginal cost of production. ( Here Q represents total output in the market whereas q represents firm level output.) (b)   Now assume that the firms collude. They again play a one-shot game. What is the output that each firm should produce in order to sustain the collusion? Find the market price, and profits of each firm. Are...
1. Suppose a market is described by demand P = 100 - 2Q and there are...
1. Suppose a market is described by demand P = 100 - 2Q and there are two firms engaged in Stackelberg Competition each with a MC = 10 What is the consumer surplus in this market (Round market output to the nearest integer)? 1. 828 2. 1916 3. 1156 4. 1811
6. Assume an industry with two firms facing an inverse market demand of P = 100...
6. Assume an industry with two firms facing an inverse market demand of P = 100 - Q. The product is homogeneous, and each firm has a cost function of 600 + 10q + 0.25q2. Assume firms agree to equally share the market. a. Derive each firm’s demand curve. b. Find each firm’s preferred price when it faces the demand curve in part a. Now assume that firm 1’s cost function is instead 25q + 0.5q2 while firm 2’s is...
Consider a market with two firms, facing the demand function: p = 120 – Q. Firms...
Consider a market with two firms, facing the demand function: p = 120 – Q. Firms are producing their output at constant MC=AC=20. If the firms are playing this game repetitively for infinite number of times, find the discount factor that will enable cooperation given the firms are playing grim trigger strategy.
Consider two identical firms in a Cournot competition. The market demand is P = a –...
Consider two identical firms in a Cournot competition. The market demand is P = a – bQ. TC1 = cq1 = TC2 = cq2 . Find the profit function of firm 1. Maximize the profit function to find the reaction function of firm 1. Solve for the Cournot-Nash Equilibrium. Carefully discuss how the slope of the demand curve affects outputs and price.
Consider a market with two identical firms, Firm A and Firm B. The market demand is...
Consider a market with two identical firms, Firm A and Firm B. The market demand is ? = 20−1/2?, where ? = ?a +?b . The cost conditions are ??a = ??b = 16. a) Assume this market has a Stackelberg leader, Firm A. Solve for the quantity, price and profit for each firm. Explain your calculations. b) How does this compare to the Cournot-Nash equilibrium quantity, price and profit? Explain your calculations. c) Present the Stackelberg and Cournot equilibrium...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT