Firm 1 and Firm 2 operate in the oligopolistic market and sell a heterogeneous product. They have agreed that the best solution for them would be to cooperate and to maximize together the joint profit from the whole market. The total production costs of the firms are described by: TC₁ = 4q1² and TC2 = 592² for q1, q2 ≥ 0, and zero otherwise. The market demand for the products is captured by the inverse demand functions: P₁ = 10 - 291 - 92 and P2 = 8 - 91 - 92. (a) Determine the production level of each firm and the prices of the products. (b) Do firms have any incentive to deviate from the cooperation agreement?
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- 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 !!!Ouestions 2 Boeing and Airbus are duopoly competitors for airplanes. Let us assume that worldwide market demand for airplanes is given by p=10000 -5Q and that costs of production are identical for both manufacturers and specified as C(q) -2q Calcute market price and total quantity if a) Airbus and Boeing are in Cournot competation b) Airbus and Boeing are in Bertrand competationbok rint An oligopoly producing a homogeneous product is comprised of three firms that act like a cartel. Assume that these three firms have identical cost schedules. Assume also that if any one of these firms sets a price for the product, the other two firms charge the same price. As long as they all charge the same price they will share the market equally; and the quantity demanded of each will be the same. Below is the total-cost schedule of one of these firms and the demand schedule that confronts it when the other firms charge the same price as this firm. Complete the marginal-cost and marginal- revenue schedules facing the firm. erences Mc Graw Hill Output Total cost Marginal cost Price Quantity demanded Marginal revenue 0 1 23456 7 8 $0 180 300 480 720 1,020 1,380 1,800 2,280 Short Anewor LA JUL 26 $780 720 660 600 540 480 420 360 Toolbar navigation (a) What price would be charged, what output would be produced, and what profit would be made by this firm? (b) If the firms…
- If firm 1 and firm 2 are the oligopolistic firms in bottled spring water production in Nomansland. The market demand is given by ? = 5000 −20?, Qd is the number of kilolitres demanded per month while P is the price of kilolitres of bottled water. The marginal cost of a kilolitre of bottled water is R10.How do I Find the Cournot equilibrium quantities and price? and how do I Find the Cournot profits and the monopolist profits?What is the homogeneous-good duopoly Cournot equilibrium if the market demand function is Q= 1,800 - 1,000p. and each firm's marginal cost is $0.28 per unit? The Cournot-Nash equilibrium occurs where q, equals and 92 equals (Enter numenic responses using real numbers rounded to two decimai places.) Furthermore, the equilibrium occurs at a price of $ (Round your answer to the nearest penny.)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
- Two firms produce and sell differentiated products that are substitutes for each other. Their dernand curves are Firm 1:Q, 40-3P,+ P, Firm 2: 0, - 40 - 3P,+ P, Bolh firms have constant marginal costs of $5.00 per unit. Both fims set their own price and take their competitor's price as fixed. Use the Nash equilibrium concept to determine the equiltbirium set of prices. Since Ihe firms ane identical, they wil set the same prices and produce the same quantities. In equibrium, each firm will charge a price of 8 and produce units of output. (Enter your responses rounded to wo decimal places)1. Assume the market demand for carbonated water be given by QD = 200 − 5P. Assuming there are two firms (A and B) producing carbonated water, each with a constant marginal cost of $ 2. a. What is the market equilibrium price and quantity when each firm behaves as a Cournot duopolist choosing quantities? What profit does each firm earn? b. What is the market equilibrium price and quantity when each firm behaves as a Bertrand duopolist choosing price? What firm profit does each firm earn now?Help me please
- Try the analysis with an n-firm Cournot oligopoly in which one firm innovates to reduce cost from c to c/2. For this problem, assume n = 2, and use the demand and cost numbers used in the lecture. That is, let inverse market demand be given by P = 100 - Q, and let marginal cost be constant at 50 per unit before the innovation, and 25 per unit after the innovation. (a) Compute what the duopolist stands to gain from innovating. How does it compare to the perfectly competitive firm and to the monopolist? (b) What can you conclude about the relationship between concentration and innovationConsider a Cournot oligopoly with three firms i = 1, 2, 3. All firms 1. The inverse demand have the same constant marginal cost c = function of the market is given by P = 9-Q, where P is the market price, and Q =E=1 9i is the aggregate output. 13 (a) Solve for the Nash equilibrium of the game including firm out- puts, market price, aggregate output, and firm profits (Hint: the NE is symmetric). (b) Now suppose these three firms play a 2-stage game. In stage 1, they produce capacities q1, q2 and 73, which are equal to the Nash equilibrium quantities of the Cournot game characterised by part (a). In stage 2, they simultaneously decide on their prices p1, p2 and p3. The marginal cost for each firm to sell up to capacity is 0. It is impossible to sell more than capacity. The residual demand for firm i is 9 - Pi – Eiti; Ij if p; > p; for all j # i D; (pi, p-i) = 9-Pi 3 if pi = Pj for all j + i . if p; < p; for all j + i 9 - Pi (Note, here we assume that the efficient/parallel rationing ap-…1. Best responses in a Cournot Oligopoly Firm A and Firm B sell identical goods Total market demand for the good is: The inverse demand function is therefore 1 P(QM) = 780 -Q=780 -0.02222QM 45 QM is total market production (i.e., combined production of firm's A and B. That is: Q(P) = 35, 100- 45P 2M = A +QB As a result, the inverse demand curve for each firm is: P(QA, QB) = 780- -1/32₁-752 45 Unlike the example in class, the two firms have different costs. = 4000A TCA (QA) TCB (QB) = 260QB = 780 -0.022220A -0.02222QB a. Using the demand function and the cost functions above, what is firm A's profit function. b. Using the profit function above and assuming that firm B produces Qg, calculate what firm A's best response is to firm B’s decision to produce QB- Note: Firm A's best response should be a function of B