The inverse demand is given by P=240-Q. The discount factor is R=0.9, and marginal production costs...

The inverse demand is given by P=240-Q. The discount factor is R=0.9, and marginal production costs are initially $120.
a. Calculate the market price, output and profits (if any) on the assumption that the market is currently: i. Monopolized ii. A Bertrand duopoly iii. A Cournot duopoly.
b. Suppose that a research institute develops a new technology that reduces marginal cost to 60.
i. Confirm that this is not a drastic innovation in the Bertrand case.
ii. Calculate the new market equilibrium price, output and profits for the monopolist and each duopolist given that in the duopoly case the innovation is made available to only one firm.
iii. How much will be the willingness to pay for this innovation for I. The monopolist II. The Bertrand duopolist III. The Cournot duopolist.

Expert Solution

Rahul Sunny answered 14 hours ago

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