Question

In: Economics

Cournot: Consider a Cournot duopoly in which firms A and B simulta- neously choose quantity. Both...

Cournot: Consider a Cournot duopoly in which firms A and B simulta- neously choose quantity. Both firms have zero costs. Market demand is given by: P =360−3Q,

where Q = qA + qB .
(a) Derive each firm’s best-response function and plot them on the same graph.

(b) Find the unique Nash Equilibrium. Label the Nash equilibrium in your graph from part (a).

(c) Calculate total welfare in the Nash Equilibrium.

(d) Calculate deadweight loss (if any) in the Nash Equilibrium relative to the competitive outcome.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

Consider a Cournot duopoly where P = 400 - 4Q1 - 4Q2. The two firms are...
Consider a Cournot duopoly where P = 400 - 4Q1 - 4Q2. The two firms are identical. Each firm treats the other firm’s production quantity as a constant. The marginal cost of production is 16 for every unit. What is the best production level for Firm 1?
Consider the equilibrium of the Cournot model of duopoly. a. Can the firms benefit from collusion...
Consider the equilibrium of the Cournot model of duopoly. a. Can the firms benefit from collusion in this instance if they happen to initially be at the intersection of the two reaction curves and the collusion is enforced? Explain your answer. b. Show that each firm has an incentive to break any collusive agreement. c. Has the experience of the international oil cartel, OPEC, supported your answers?
Consider a Cournot duopoly, the firms face an (inverse) demand function: Pb = 128 - 3...
Consider a Cournot duopoly, the firms face an (inverse) demand function: Pb = 128 - 3 Qb. The marginal cost for firm 1 is given by mc1 = 4 Q. The marginal cost for firm 2 is given by mc2 = 6 Q. (Assume firm 1 has a fixed cost of $ 65 and firm 2 has a fixed cost of $ 87 .) How much profit will firm 2 earn in the duopoly equilibrium ?
Consider a Cournot duopoly of two identical cigarette producing firms, Warlboro and Cramel. They produce tobacco...
Consider a Cournot duopoly of two identical cigarette producing firms, Warlboro and Cramel. They produce tobacco of same quality and, ceteris paribus, each firm sells to 1 million smokers, making $100 profits per smoker. These 2 million smokers are addicts (as most smokers are). They may change which tobacco they smoke but they do not quit. On the other hand, those who are not smokers will not start even if they are encouraged (because they understand the harm). In other...
Consider a Cournot duopoly of two identical cigarette producing firms, Warlboro and Cramel. They produce tobacco...
Consider a Cournot duopoly of two identical cigarette producing firms, Warlboro and Cramel. They produce tobacco of same quality and, ceteris paribus, each firm sells to 1 million smokers, making $100 profits per smoker. These 2 million smokers are addicts (as most smokers are). They may change which tobacco they smoke but they do not quit. On the other hand, those who are not smokers will not start even if they are encouraged (because they understand the harm). In other...
Question #5: Consider a Cournot duopoly, the firms face an (inverse) demand function: Pb = 110...
Question #5: Consider a Cournot duopoly, the firms face an (inverse) demand function: Pb = 110 - 7 Qb. The marginal cost for firm 1 is given by mc1 = 5 Q. The marginal cost for firm 2 is given by mc2 = 7 Q. (Assume firm 1 has a fixed cost of $ 112 and firm 2 has a fixed cost of $ 148 .) How much profit will firm 2 earn in the duopoly equilibrium ?
Two firms are participating in a Cournot duopoly. The demand function in the market is given...
Two firms are participating in a Cournot duopoly. The demand function in the market is given by Q=430−2P. Each firm’s total cost is given by C(q)=5q+q2. (1) Write down the inverse demand function and the maximization problem for Firm 1 given that Firm 2 is expected to produce q2^e. (2) Write down the reaction function q1(q2^e) for Firm 1. (3) Find the market price, quantities supplied, and firms’ profits in the Cournot equilibrium of this game.
) Consider a Bertrand duopoly where ?? , ?? and ??(?? ) = ??? are quantity,...
) Consider a Bertrand duopoly where ?? , ?? and ??(?? ) = ??? are quantity, price and total cost, respectively, for firm ? ∈ {1,2} where ? > 0. Assume neither firm has a capacity constraint. a. Derive the equilibrium quantities and prices if the products are undifferentiated. b. Derive the equilibrium quantities and prices if the products are differentiated such that residual inverse demand for firm ? is ?? = ?? − ???? + ???? given the price...
Demand in a market dominated by two firms (a Cournot duopoly) is determined according to: P...
Demand in a market dominated by two firms (a Cournot duopoly) is determined according to: P = 300 – 4(Q1 + Q2), where P is the market price, Q1 is the quantity demanded by Firm 1, and Q2 is the quantity demanded by Firm 2. The marginal cost and average cost for each firm is constant; AC=MC = $77. The cournot-duopoly equilibrium profit for each firm is _____.
Demand in a market dominated by two firms (a Cournot duopoly) is determined according to: P...
Demand in a market dominated by two firms (a Cournot duopoly) is determined according to: P = 300 – 4(Q1 + Q2), where P is the market price, Q1 is the quantity demanded by Firm 1, and Q2 is the quantity demanded by Firm 2. The marginal cost and average cost for each firm is constant; AC=MC = $68. The cournot-duopoly equilibrium profit for each firm is _____. Hint: Write your answer to two decimal places.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT