Consider a price-setting oligopoly with 4 identical firms, all with constant marginal cost c. The firms...

Consider a price-setting oligopoly with 4 identical firms, all with constant marginal cost c. The firms compete for an infinite number of periods and have the same discount factor. Derive the minimum discount factor such that there exists a collusive equlibirum with monopoly pricing.

Expert Solution

Rahul Sunny answered 2 years ago

(a) [15 marks] Consider two identical firms with no fixed costs and constant marginal cost c...

(a) [15 marks] Consider two identical firms with no fixed costs and constant marginal cost c which compete in quantities in each of an infinite number of periods. The quantities chosen are observed by both firms before the next round of play begins. The inverse demand is given by p = 1 − q1 − q2, where q1 is the quantity produced by firm 1 and q2 is the quantity produced by firm 2. The firms use ‘trigger strategies’ and...

The Toy business has 4 firms. All firms have an identical marginal cost of MC =...

The Toy business has 4 firms. All firms have an identical marginal cost of MC = 9 and a fixed cost of 0. The market demand for Toys is T=200-20P were T is quantity and P is price of Toys. 1. If P=8.5 how much could a firm produce 2. In a short run equili. could the equili. price be P>9? 3. In a SR equili. all firms produce the same amount of toys. What is the equili price, total...

The gadget industry has four firms. All the firms have constant marginal cost, MC = 9...

The gadget industry has four firms. All the firms have constant marginal cost, MC = 9 and their fixed cost is zero. The market demand for gadgets is G = 400 − 40P, where G is the quantity of gadgets and P is the price of the gadgets. a. If P = 8.5, how much would a firm would produce? b. In a short-run equilibrium, it is possible to have an equilibrium price such that P > 9? Why or...

Compare price taker firms with price searcher firms in terms of marginal cost and marginal revenue....

Compare price taker firms with price searcher firms in terms of marginal cost and marginal revenue. How would each type firm use those concepts in decision making?

When marginal product is increasing: Marginal cost is increasing c. marginal cost is constant Marginal cost is...

When marginal product is increasing: Marginal cost is increasing c. marginal cost is constant Marginal cost is decreasing d average product is decreasing

Consider an industry in which all firms have constant marginal costs of 50, MC = 50,...

Consider an industry in which all firms have constant marginal costs of 50, MC = 50, and market demand is Qd = 385 - 0.5P (a) If there are two firms operating as Cournot duopolists, find the equilibrium price and total quantity (b) If there are two firms operating as Stackelberg duopolists, find the equilibrium price, how much the leader firm produces and how much the follower firm produced?

Consider a competitive industry where all firms have identical cost functions C(y) = y^2 +1 if...

Consider a competitive industry where all firms have identical cost functions C(y) = y^2 +1 if y > 0 and C(0) = 0. Suppose that the demand curve for this industry is given by D(p) = 52 − p. (a) Find the individual supply curve of each firm. (b) Suppose there are n firms in the industry. Find the industry supply curve. (c) Find the price and quantity corresponding to a short-run market equilibrium assuming there are n firms in...

The table shows the cost data for one of several identical firms in a constant cost...

The table shows the cost data for one of several identical firms in a constant cost perfectly competitive industry for product X. Fill in the table given the fixed cost is $50. Quantity of X TVC TFC TC AFC AVC ATC MC 0 0 1 70 2 120 3 155 4 193 5 242 6 302 7 370 8 462 9 571 1. In the short run, calculate the output and profit or loss for this typical firm for each...

Firms maximize profit by setting marginal revenue (MR) equal to marginal cost (MC). Assuming that the...

Firms maximize profit by setting marginal revenue (MR) equal to marginal cost (MC). Assuming that the MR curve is downward sloping and the MC curve is upward sloping, explain why is it not profit maximizing for a firm to be operating at an output level where MC is not equal to MR?

A Cournot oligopoly consists of four firms, each with a marginal cost of production of MC=10....

A Cournot oligopoly consists of four firms, each with a marginal cost of production of MC=10. The market demand curve is given by Q=(100-P)/3 . The four firms are looking to merge into a single firm so they can increase their profit margin by taking advantage of scale economies. Suppose that after the merger, market demand remains the same but the marginal cost of production of the merged firm decreases to MC=4. 26. What is the change in net social...

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