In the market for melons, there are two identical firms: Alpha and Beta. Each firm has...

a) What is the Cournot equilibrium (output and profit)? Show your work.

b) What is the Stackelberg equilibrium (output and profit) (assume Alpha decides first its output)?

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

In the market for melons, there are two identical firms: Alpha and Beta. Each firm has...

In the market for melons, there are two identical firms: Alpha and Beta. Each firm has a constant marginal cost of $0.28 and no fixed cost (so the average cost is equal to marginal cost). The demand in the market is ?=1,000−1,000∙?. a) What is the Cournot equilibrium (output and profit)? Show your work. b) What is the Stackelberg equilibrium (output and profit) (assume Alpha decides first its output)? Show your work.

Consider an industry that consists of two firms, Alpha and Beta, that produce identical products. Suppose...

Consider an industry that consists of two firms, Alpha and Beta, that produce identical products. Suppose that Alpha seeks to preempt Beta by making its capacity decision a year before Beta’s. Thus, by the time Beta makes its decision, it will have observed Alpha’s choice and must adjust its decision making accordingly. We will assume that each firm always produces at full capacity. Thus, expansion of capacity entails a trade-off. The firm may achieve a larger share of the market,...

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...

Two identical firms (identical cost functions) operate on a market. For each of the following market...

Two identical firms (identical cost functions) operate on a market. For each of the following market demand curves and cost curves determine the Bertrand, Cournot, and Stackelberg outcomes (prices, quantities, and profits - for each firm, and at the market level). Also determine the collusive outcome (assuming the two firms form a cartel). Compare the outcomes. a) P = 200 − 2Q, T C = 50 + 10Q (PB = 10, PC = 73.33, PS = 57.5, PM = 105)...

Suppose there are two firms operating in a market. The firms produce identical products, and the...

Suppose there are two firms operating in a market. The firms produce identical products, and the total cost for each firm is given by C = 10qi, i = 1,2, where qi is the quantity of output produced by firm i. Therefore the marginal cost for each firm is constant at MC = 10. Also, the market demand is given by P = 106 –2Q, where Q= q1 + q2 is the total industry output. The following formulas will be...

A firm has two mutually exclusive investment opportunities, Alpha and Beta. Returns on the projects are...

A firm has two mutually exclusive investment opportunities, Alpha and Beta. Returns on the projects are as follows: Project Alpha: returns $300 million after one year with probability 40% and $50 million after one year with probability 60%. Project Beta returns $180 million after one year for certain. Assume that all investors are risk-neutral so that present values can be calculated by discounting expected future cash flows at the risk-free interest rate of 5% per year. Also, assume that all...

Suppose there are two firms, Firm A and Firm B that produce identical products in a...

Suppose there are two firms, Firm A and Firm B that produce identical products in a duopoly. Firm A has a constant marginal cost of production, MCA = 10 and Firm B has a constant marginal cost, MCB = 14. The market demand curve for the the product is given by P = 42 − 0.004Q where Q = (QA + QB). (a) Suppose that Firm A has a first-mover advantage. That is, Firm A is able to choose output...

Consider a market with two firms, where the firms manufacture commodities that are identical in all...

Consider a market with two firms, where the firms manufacture commodities that are identical in all respects. Firm i produces output level qi , i = 1, 2, and q = q1+q2. The market demand curve is p = a−bq where a and b are positive constants. Firm i earns profits πi(q1, q2) = pqi − ciqi , where ci is its unit-cost of production. Assume 0 < ci < a for i = 1, 2. Finally, assume that Firm...

Two firms, Firm A and Firm B, operate in a duopoly market. Firm A has been...

Two firms, Firm A and Firm B, operate in a duopoly market. Firm A has been a leader in the industry for years and has observed how firm B reacts to its output decisions. If one of the firms were to produce as a perfectly competitive firm, they would produce 6,000 units. Marginal costs are assumed to be constant and equivalent between the two firms. Use this information to answer the following questions What oligopoly model is most appropriate to...

A competitive industry includes a large number of identical firms. Each firm has the total cost...

A competitive industry includes a large number of identical firms. Each firm has the total cost function TC(q) = q2 + 25. It can be shown that each firm’s marginal cost function is MC(q) = 2q. a. Derive an equation for a single firm’s supply equation.. b. Derive the individual firm’s average total cost equation. Show your work. Now suppose the market price of the firms’ output is $8. c. What will each firm’s profit-maximizing output be equal to? d....

Subjects