Question

In: Economics

Assume that there are two firms competing with each other (duopoly) and make their output decisions...

Assume that there are two firms competing with each other (duopoly) and make their output decisions at the same time.

a) If a collusion occurs between both firms, will it be better or not? Explain your answers. Please proof by using a mathematical equation that explain before and after a collusion. (10 points)

b) What advantages the first firm as a first mover will have if this firm sets its output first than the other firm? Explain and support your answers by using a mathematical equation (10 points)

c) Explain in what condition we can use the Bertrand Model to analyze the two firms? Why has this Bertrand Model been criticized? [5 points]

Expert Solution

A:

I have taken a hypothetical example and solved for two cases:

1. cournot model of cooperative oligopoly

2. cournot model of non-cooperative oligopoly

this will help us understand the concept of before and after collusion in a better way.

B:

This is the classic case of stackelberg quantity leadership. i have taken a hypothetical example to explain the given case.

C: BETRAND CASE

Thank you, i hope this effort helps you.

Rahul Sunny answered 1 year ago

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