How would the Coumot equilibrium change in the airline example if American's marginal cost were $100 and United's were $2007 The demand the duopoly quantity-setting firms face is Q-339-p with an inverse demand function of p330 - 19A- 19U- where ga is the quantity produced by American and qu is the quantity produced by United. The Cournot-Nash equilibrium occurs where qa equalsand qu equals (enter numeric responses using integers)
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- While there is a degree of differentiation between major grocery chains like Albertsons and Kroger, theregular offering of sale prices by both firms for many of their products provides evidence that these firmsengage in price competition. For markets where Albertsons and Kroger are the dominant grocers, thissuggests that these two stores simultaneously announce one of two prices for a given product: a regularprice or a sale price. Suppose that when one firm announces the sale price and the other announces theregular price for a particular product, the firm announcing the sale price attracts 1000 extra customers toearn a profit of $5000, compared to the $3000 earned by the firm announcing the regular price. Whenboth firms announced the sale price, the two firms split the market equally (each getting an extra 500customers) to earn profits of $2000 each. When both firms announced the regular price, each companyattracts only its 1500 loyal customers and the firms each earned $4500 in…16:04 AM • ll l 16%! eclass.uonbi.ac.ke/mod/qu 2 If a duopolist has a linear demand curve of the form Q=400 – P. Assuming each firm has total cost (TC=3000+100Q). Calculate the profit- maximizing price-quantity combinations using the following four oligopoly pricing models listed below demonstrating that: а. Under the Cournot model, both firms will earn same level of profit and determine industry profit and explain why this is would be the case. b. Under the Cartel model each firm earns a higher profit than under Cournot. Under the Quasi-competitive model, the firm will make a loss equivalent to fixed cost. С. d. Under the Stackelberg's model the leader will earn more than twice the profit of the follower and that total industry profits will be lower than under both Cournot and Cartel models. Explain why this is would be the case. I + II II !!!Suppose that there are two firms producing a homogenous product and competing in Cournot fashion and let the market demand be given by Q = 120- Assume for simplicity that each firm operates with zero %3D total cost. Find Cournot Nash equilibrium total surplus. 12800 O 6400 O 13600 19200
- Suppose that there are two firms producing a homogenous product and competing in Cournot fashion and let the market demand be given by Q = 240- Assume for simplicity that each firm operates with zero total cost. Find each firm's Cournot Nash equilibrium profit for each firm. $21600 O $19200 O $18000 O $16000QUESTION 4 If Bertrand duopolists respectively have marginal costs of 10 (firm 1) and 8 (firm 2), which of the prices below can arise in Nash equilibrium? (Assume that prices must be quoted in full cents, e.g. $0.99 or $1, but $0.995 is not possible. If prices are equal, half of the customers buy from each firm.) O Both firms charge $8.01. Firm 1 charges $10 and firm 2 charges $8. Both firms charge $9. Firm 1 charges $10 and firm 2 charges $9.99.H7. For q1=120-2p1-p2 and q2=120-2p2+p1, show that the duopolists have incentives to collude as well as find the -joint profit-maximizing price, output and profit and find each firm’s price, output and profit. What is the optimal defection of each firm, is collusion Nash equilibrium? Show in 2x2 matrix. Is it a prisoner’s dilemma?
- Discuss what can be the expected resultof the firms in the oligopoly, that is, that can be the expected Nash Equilibrium solution fora household cleaning appliance.◄ Search 12:47 PM Sun Nov 12 ← Note Nov 12, 2023 Uptown's price strategy The Nash equilibrium occurs when High Low LED RareAir's price strategy High $12 $15 The more favorable outcome would be for $12 Tt ✪ $6 B Low $6 D $8. $15 $8 S O both firms have an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the dominant strategy of cell A. 92% neither firm has an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the dominant strategy of cell D. O one firm consistently has an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the high-price strategy of cell B. O one firm consistently has an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the high-price strategy of cell C. O the firms to collude and use the high-price strategy but this strategy requires cooperation. O one firm to take the lead and let the…15. Consider two competing firms, JR and OG. Suppose OG produces an estab- lished product and JR can either produce a clone or a differentiated product. If JR produces a clone, OG can either sue JR or not sue it. If JR produces a differentiated product rather than a clone, OG can either buy JR or not buy it. The two firms are in a non-cooperative game whose extensive form is rep- resented in the tree diagram below, where the payoffs on the right represent profits. -1 for OG 1 for JR sue OG don't -2 for OG clone sue 1 for JR JR don't clone 1 for OG -1 for JR buy OG don't buy 2 for OG 0 for JR If the two firms' managers are rational and recognize each other as rational, then (a) JR clones and OG sues (b) JR does not clone and OG buys (c) JR does not clone and OG does not buy (d) JR clones and OG does not sue (e) JR clones and OG sues with probability .5
- 2. Consider a duopoly with firms selling identical goods. Firms are assumed to face a linear demand function, identical constant marginal costs and zero fixed costs. a. Assume decisions are taken in a two stage game. In stage 1, Firm A chooses quantity, in stage 2, Firm B chooses quantity. Use graphical analysis and economic intuition to obtain the Subgame Perfect Nash Equilibrium Strategies. b. What would happen in a) if you add a stage 3 to the above game where firm A can change its quantity? c. Assume now that firms choose prices. Firm A chooses price in stage 1 and Firm B chooses price in stage 2. Use graphical analysis and economic intuition to explain the price consumers will pay d. How would your answer in part c change if firms had different constant marginal costs?Consider the payoff matrix of Hulu and Netflix. Why don't both firms just raise prices? NETFLIX HULU 15, 15 8, 20 20, 8 10, 10 O It is in each firm's profitable interest to lower prices, no matter what the other competitor does. O Raising prices is illegal in this case. O Firms are concerned about a third competitor entering at higher prices. O Higher prices will increase the number of customers beyond what the firms can handle.Refer to the table below to answer the following questions. Table 14.2.10 Fim A Comply A: Sim Cheat A $1 Sm Comply B Sim B-S05m Firm B A:-50.5m A0 Cheat B $15m B:0 Refer to Table 14.2.10. Firm A and Firm B are the only producers of soap powder. They collude and agree to share the market equally. The equilibrium a dominant strategy equilibrium because the strategy in this game is for a firm Select one O A is to comply regardless of the other firm's choice O B.is to comply when the other firm cheats and to cheat when the other firm complies O Cis not to comply when the other firm complies and to cheat when the other firm cheats OD. is to cheat regardless of the other firm's choice OEis not to comply when the other firm cheats and to cheat when the other firm complies 219 PM