Question
In: Economics
2. Suppose two firms are competing in prices (Bertrand) in an industry where demand is P=300-10Q....
2. Suppose two firms are competing in prices (Bertrand) in an industry where demand is P=300-10Q. Assume neither firm faces any fixed costs.
(a) If both firms have MC=100, what is the equilibrium price? Profits?
(b) Suppose one firm has MC=200 and one has MC=0. Approximately how much profit does each firm make?
(c) Suppose one firm has MC=150 and one has MC=100. Approximately how much profit does each firm make?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Firms A and B are Bertrand duopolists facing market demand, P = 300-Q, where Q =...
Firms A and B are Bertrand duopolists facing market demand, P =
300-Q, where Q = QA+QB, and marginal cost, MC = 68. a)What level of
output will each firm will produce? b)What price will each charge?
c)Why is this outcome a Nash equilibrium?
problem 1. Suppose two firms facing a demand D(p) compete by setting prices simultaneously (Bertrand Competition)....
problem 1. Suppose two firms facing a demand D(p)
compete by setting prices simultaneously (Bertrand Competition).
Firm 1 has a constant marginal cost c1 and Firm 2 has a marginal
cost c2. Assume c1 < c2, i.e., Firm 1 is more efficient. Show
that (unlike the case with identical costs) p1 = c1 and p2 = c2 is
not a Bertrand equilibrium.
how do you solve this?
(a) What is the Bertrand trap faced by firms competing on setting prices? Explain in a...
(a) What is the Bertrand trap faced by firms competing on
setting prices? Explain in a few sentences.
Now let us consider the current trend of online sales.
E-commerce (selling products in an online marketplace) represents
an increasing fraction of economic transactions in many different
industries compared to physical brick-and-mortar stores that sold
products in the past.
(b) Does e-commerce create a Bertrand trap? (Hint: Discuss in
terms of how online shopping affects (i) product differentiation
and (ii) capacity constraints...
Consider Bertrand Competition with demand curve P = 56 − 2 Q. There are two firms....
Consider Bertrand Competition with demand curve P = 56 − 2 Q.
There are two firms. Firm 1 has MC=12. Firm 2 has MC=8. What is the
equilibrium number of units transacted in this market
(Round to the nearest integer)?
In an industry where demand is Q = 120 – P and two identical firms have...
In an industry where demand is Q = 120 – P and two identical
firms have MC = AC = 30 find the Cournot and the Stackelberg
equilibriums and compare the corresponding market outcomes. Do
consumers have a preference for one market structure over the
other?
Two firms are price-competing as in the standard Bertrand model. Each faces the market demand function...
Two firms are price-competing as in the standard Bertrand model.
Each faces the market demand function D(p)=50-p. Firm 1 has
constant marginal cost c1=10 and firm 2 has c2=20. As usual, if one
of the firms has the lower price, they capture the entire market,
and when they both charge exactly the same price they share the
demand equally.
1. Suppose A1=A2={0.00, 0.01, 0.02,...,100.00}. That is, instead
of any real number, we force prices to be listed in whole cents....
Two firms set prices in a market with demand curve Q = 6 − p, where...
Two firms set prices in a market with demand curve Q = 6 − p,
where p is the lower of the two prices. If firm 1 is the lower
priced firm, then it is firm 1 that meets all of the demand;
conversely, the same applies to firm 2 if it is the lower priced
firm. For example, if firms 1 and 2 post prices equal to 2 and 4
dollars, respectively, then firm 1–as the lower priced firm–meets...
Two firms set prices in a market with demand curve Q = 6 − p, where...
Two firms set prices in a market with demand curve Q = 6 − p,
where p is the lower of the two prices. If firm 1 is the lower
priced firm, then it is firm 1 that meets all of the demand;
conversely, the same applies to firm 2 if it is the lower priced
firm. For example, if firms 1 and 2 post prices equal to 2 and 4
dollars, respectively, then firm 1–as the lower priced firm–meets...
Suppose that firms A,B,C and D are Bertrand duopolists in the salt industry. The market demand...
Suppose that firms A,B,C and D are Bertrand duopolists in the
salt industry. The market demand curve can be specified as
Q=100-3p, Q=qA+qB+qC+qD. The cost of firm A is C(qA)=7qA The cost
of firm B is C(qB)=3qB The cost of firm C is C(qC)=7qC The cost of
firm D is C(qD)=5qD
Firm A will earn?
Firm B will earn?
Firm C will earn?
Firm D will earn?
1. Suppose the demand function of an industry is P=100-0.5X and there are two firms A...
1. Suppose the demand function of an industry is P=100-0.5X and
there are two firms A and B in it. Futher assume that the firm A
has a constant cost function of CA = 5xA and firm B has an
increasing cost function CB =0.5xB. (X= xA +xB ).
a. What would the reaction function of each firm?
b. What would be the profit of each firm? c. What would the out
put of each firm? d. What would be...
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