6: When we have a homogeneous product duopoly, each firm has constant marginal cost of 10. The...

6: When we have a homogeneous product duopoly, each firm has constant marginal cost of 10. The market inverse demand curve is p = 250 – 2Q where Q = q₁ + q₂ is the sum of the outputs of firms 1 and 2, and p is the price of the good. Marginal and average cost for each firm is 10.

(a) In this market, what are the Cournot and Bertrand equilibrium quantities and prices? Will the firms collude in a two period version of the model in which each firm can observe the other’s behaviour in the first period?

(b) Assuming firm 1 is the “leader” (i.e., first mover) and firm 2 is the “follower” (i.e., moves following the first), find the outcome for the Stackelberg model.

Expert Solution

Rahul Sunny answered 2 years ago

6: When we have a homogeneous product duopoly, each firm has constant marginal cost of 10....

6: When we have a homogeneous product duopoly, each firm has constant marginal cost of 10. The market inverse demand curve is p = 250 – 2Q where Q = q1 + q2 is the sum of the outputs of firms 1 and 2, and p is the price of the good. Marginal and average cost for each firm is 10. (a) In this market, what are the Cournot and Bertrand equilibrium quantities and prices? Will the firms collude in...

Question 6 In a homogeneous product duopoly, each firm has constant marginal cost equal to 10. The...

Question 6 In a homogeneous product duopoly, each firm has constant marginal cost equal to 10. The market inverse demand curve is p = 250 – 2Q where Q = q1 + q2 is the sum of the outputs of firms 1 and 2, and p is the price of the good. Marginal and average cost for each firm is 10. (a) What are the Cournot and Bertrand equilibrium quantities and prices in this market? In a two period version of the model in...

In a homogeneous product duopoly, each firm has constant marginal cost equal to 10. The market...

In a homogeneous product duopoly, each firm has constant marginal cost equal to 10. The market inverse demand curve is p = 250 – 2Q where Q = q1 + q2 is the sum of the outputs of firms 1 and 2, and p is the price of the good. Marginal and average cost for each firm is 10. Word limit per question: 400 words (200 words per part of question) (a) What are the Cournot and Bertrand equilibrium quantities...

In a homogeneous product duopoly, each firm has constant marginal cost equal to 10. The market inverse...

In a homogeneous product duopoly, each firm has constant marginal cost equal to 10. The market inverse demand curve is p = 250 – 2Q where Q = q1 + q2 is the sum of the outputs of firms 1 and 2, and p is the price of the good. Marginal and average cost for each firm is 10. (a) What are the Cournot and Bertrand equilibrium quantities and prices in this market? In a two period version of the model in which each...

In a duopoly, each firm has marginal cost MC = 100, and market demand is Q...

In a duopoly, each firm has marginal cost MC = 100, and market demand is Q = 500 - 0.5p. Assuming average cost is the same as marginal cost. In which oligopoly, Cournot or Stackelberg, do firms have more market power? a. Cournot since the Lerner Index in the Cournot model is twice as much as that in the Stackelberg model. b. Stackelberg since the Lerner Index in the Cournot model is twice as much as that in the Stackelberg...

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

Suppose a monopoly with constant marginal cost of 10 sells its product to identical consumers. Each...

Suppose a monopoly with constant marginal cost of 10 sells its product to identical consumers. Each consumer has an inverse demand curve given by P = 210 − 10Q. (a) Find the price and quantity the monopolist chooses if it can only set one price, and it can not use a two-part tariff. What is the monopolist’s profit on each consumer? (b) Now suppose the monopolist can use a two-part tariff. What is the profit maximizing choice of the fixed...

Suppose that identical duopoly firms have constant marginal costs of $16 per unit. Firm 1 faces...

Suppose that identical duopoly firms have constant marginal costs of $16 per unit. Firm 1 faces a demand function of: q1=70-2(p1)+1(p2) where q 1 is Firm 1's output, p1 is Firm 1's price, and p 2 is Firm 2's price. Similarly, the demand Firm 2 faces is: q2=70-2(p2)+1(p1) Solve for the Bertrand Equilibrium: In equilibrium (p1) equals _ and (p2) equals _

The inverse demand for a homogeneous-product Stackelberg duopoly is P = 12,000 -5Q. The cost structures...

The inverse demand for a homogeneous-product Stackelberg duopoly is P = 12,000 -5Q. The cost structures for the leader and the follower, respectively, are CL(QL) = 3,000QL and CF (QF) = 6,000QF.. a. What is the follower’s reaction function? QF= ____ - _____ QL b. Determine the equilibrium output level for both the leader and the follower. Leader output: _______ Follower output: _______ c. Determine the equilibrium market price. $________ d. Determine the profits of the leader and the follower. Leader...

The inverse demand for a homogeneous-product Stackelberg duopoly is P = 18,000 -5Q. The cost structures...

The inverse demand for a homogeneous-product Stackelberg duopoly is P = 18,000 -5Q. The cost structures for the leader and the follower, respectively, are CL(QL) = 2,000QL and CF (QF) = 4,000QF.. a. What is the follower’s reaction function? QF=_____ - ______ QL b. Determine the equilibrium output level for both the leader and the follower. Leader output: Follower output: c. Determine the equilibrium market price. $ d. Determine the profits of the leader and the follower. Leader profits: $...

Question