A market has the following demand function: P = 120 where Q Σ0 i=1 a) Assuming Cournot-Nash market, fill in the table below when firm one has MC, firm two has MC2 = 20 and firm three has MC3 = 20. Additionally, there is no Fixed cost for none of the firms. 10, [10 marks]
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Assuming Cournot-Nash market, fill in the table below when firm one has MC, = 10, firm two has MC2 = 20 and firm three has MC3 = 20. Additionally, there is no Fixed cost for none of the firms.
Using data from the table below, explain the merger paradox when firms 2 and 3 merge. How the merged firm (firm 2 and 3) will be worse off?
How would this outcome differ if all three firms merged?
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- . Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell tablets: Padmania and Capturesque. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its tablets. Capturesque Pricing High Low Padmania Pricing High 9, 9 3, 15 Low 15, 3 7, 7 For example, the lower-left cell shows that if Padmania prices low and Capturesque prices high, Padmania will earn a profit of $15 million, and Capturesque will earn a profit of $3 million. Assume this is a simultaneous game and that Padmania and Capturesque are both profit-maximizing firms. If Padmania prices high, Capturesque will make more profit if it chooses a price, and if Padmania prices low, Capturesque will make more profit if it chooses a price. If Capturesque prices high, Padmania will make more profit if it chooses a price, and if Capturesque prices low, Padmania…2. Using a payoff matrix to determine the equilibrium outcome Suppose that Zipride and Citron are the only two firms in a hypothetical market that produce and sell electric scooters. The following payoff matrix gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for scooters. Zipride Pricing High Low Citron Pricing High Low 10, 10 5, 16 16,5 For example, the lower-left cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $16 million, and Citron will earn a profit of $5 million. Assume this is a simultaneous game and that Zipride and Citron are both profit-maximizing firms. 7,7 If Zipride prices high, Citron will make more profit if it chooses a price. If Citron prices high, Zipride will make more profit if it chooses a price. Considering all of the information given, pricing high True If the firms do not collude, what strategies will they end up choosing? O False price, and…Suppose that the demand in a particular industry is given by Qd = 100 2P. When the market price in the industry is $10 per unit, total demand in the industry is that each of the four largest firms in the industry sell 15 units. Based on this information, the four- Furtrermore, assume firm concentration ratio is Select one: A. 45 units; 0.75 B. 80 units; 1.00 O C. 80 units; 0.75 D. 45 units; 0.25
- 4. In 2056, there are two mining firms operating on the moon, extracting Helium 3. Once both firms have entered the market, they compete a la Cournot. The market inverse demand function is given by P(Q) = 8 – Q. Assume that both firms have the total cost functions = 2+ 2q. Let the star superscript* denote equilibrium quantities/prices/profits. Which C(q): of the following statements is true? (a) qi = 4 = 4 (b) qi > qž (c) p* = 6 (d) nj < T (e) Tỉ = = 2 5. Assume the same demand and cost structures as in question 4, but now firm 1 enters the market first and firm 2 follows, as in the Stackelberg model from lecture (both firms are guar- anteed to enter; the only choice is quantities produced). Which of the following statements regarding the equilibrium outcome is FALSE? (a) The first mover produces a greater quantity than the second mover (b) Total market output is Q* = 4.5 (c) The second mover will receive a negative profit (d) The first mover will receive a greater profit than the…A market has the following demand function: 1 P = 120 where Q, Σ0 a) Assuming Cournot-Nash market, fill in the table below when firm one has MC, = 10, firm two has MC, = 20 and firm three has MC, = 20. Additionally, there is no Fixed cost for none of the firms. b) Using data from the table below, explain the merger paradox when firms 2 and 3 merge. How the merged firm (firm 2 and 3) will be worse off? c) How would this outcome differ if all three firms merged? Industry level Output Number of Firm level Firms Price Profits Output Profits 1 36. Two firms, Firm 1 and Firm 2 and are competing in quantities. The demand they are facing is given by p=1-91-92, with p being the price of the good, and 9₁ and 92 the quantities produced by firm 1 and 2 respectively. The total cost of firm 1 is TC1 (91) = 9₁ and the one of firm 2 is TC₂ (92) = 292. (a) Find the Cournot equilibrium. (b) The government decides that it wants to make the market more competitive. As such it decides to offer to Firm 1 a license to become the leader in the market. The licence costs F, and if Firm 1 buys it, it will be allowed to choose its quantity before Firm 2. What is the maximum Firm 1 would be willing to pay for this license?
- 4. In 2056, there are two mining firms operating on the moon, extracting Helium 3. Once both firms have entered the market, they compete a la Cournot. The market inverse demand function is given by P(Q) = 8 - Q. Assume that both firms have the total cost functions C(q) =2+2q. Let the star superscript* denote equilibrium quantities/prices/profits. Which of the following statements is true? (a) q₁ =q2 = 4 (b) qt > 92 (c) p* = 6 (d) π₁ < π₂ (e) T₁ = π = 2 the Cthe set of Fationalizable strategies will be the same for party R.) Explain your reasoning. ve Intel and AMD, the primary producers of computer central processing units (CPUS), compete with one another in the mid-range chip category (among other categories). Assume that global demand for mid-range chips depends on the quantity that the two firms make, so that the price (in dollars) for mid-range chips is given by P = 210 – Q, where Q = qin- || GAMD and where the quantities are measured in millions. Each mid- + 9AMD tel range chip costs Intel $60 to produce. AMD's production process is more streamlined; each chip costs them only $48 to produce. (a) Write the profit function for each firm in terms of qintel and qAMD- Find each firm's best-response rule. (b) Find the Nash equilibrium price, quantity, and profit for each firm. (c) (Optional) Suppose Intel acquires AMD, so that it now has two sep- arate divisions with two different production costs. The merged firm wishes to maximize total…2. Using a payoff matrix to determine the equilibrium outcome Suppose that Flashfry and Warmbreeze are the only two firms in a hypothetical market that produce and sell air fryers. The following payoff matrix gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for fryers. Flashfry Pricing High Low For example, the lower-left cell shows that if Flashfry prices low and Warmbreeze prices high, Flashfry will earn a profit of $15 million, and Warmbreeze will earn a profit of $3 million. Assume this is a simultaneous game and that Flashfry and Warmbreeze are both profit-maximizing firms. Warmbreeze Pricing High Low 11, 11 3,15 15,3 9,9 If Flashfry prices high, Warmbreeze will make more profit if it chooses a chooses a price. If Warmbreeze prices high, Flashfry will make more profit if it chooses a chooses a price. Considering all of the information given, pricing high If the firms do not collude, what strategies will…
- ) Two firms produce identical product and sell it in a market with demand given by P 400 20. The firms' costs are and TC₁ = 40q1 and TC2=40q2.. a) Find both firms' BR functions. b) Find Cournot equilibrium outputs of each firm, market quantity and price, and firms' profits. c) Suppose the firms decide to collude: find how much they should produce in total, how much should be produced by each firm and what price they should charge? d) Find Stackelberg equilibrium if firm 1 chooses output first. e) Make three diagrams: (i) BR functions with the outcomes of parts (b)-(d); (ii) firm 1's residual demand, MR and outcome for Cournot; (iii) firm 1's residual D, MR and outcome for collusion. f) Find Bertrand equilibrium (market output and price and output produced by each firm).QUESTION 13 Consider a market where two firms (1 and 2) produce differentiated goods and compete in prices. The demand for firm 1 is given by D₁(P₁, P2) = 140 - 2p1 + P2 and demand for firm 2's product is D2 (P1, P2) 140 - 2p2 + P1 Both firms have a constant marginal cost of 20. What is the Nash equilibrium price of firm 1? (Only give a full number; if necessary, round to the lower integer; no dollar sign.)Initially there are six firms producing differentiated products. The demand function for the good produced by firm i, i=1,2..,6, is given by qi = 10-2pi+0.3 summation pj where the sum is taken over the five prices other than firm i. Each firm has the same marginal cost c. The firms choose prices simultaneously; that is, they are differentiated products Bertrand competitors. (a) Solve for the symmetric Nash equilibrium prices. (b) Suppose that you observe each firm to set a price of 4.8. What must c be? (c) Suppose that two of the six firms merge to become a single firm. The firm continues to produce both goods. Using the marginal cost you found in (b), derive the new post-merger Nash equilibrium prices.