11. Suppose there is a duopoly of two identical firms, A and B, facing a market inverse demand of P = 140 – 0.5Q, and cost functions of CA = 20QA and Cg = 20QB respectively. a. Find the Cournot-Nash equilibrium and profit for each firm. b. Suppose that A acts as the leader in a Stackelberg model and B responds. What are the respective quantities and profits of each firm now? Is it advantageous to move first? c. If the firms were able to collude, how much additional profit could they earn if they switch from simple single pricing to perfect price discrimination?
11. Suppose there is a duopoly of two identical firms, A and B, facing a market inverse demand of P = 140 – 0.5Q, and cost functions of CA = 20QA and Cg = 20QB respectively. a. Find the Cournot-Nash equilibrium and profit for each firm. b. Suppose that A acts as the leader in a Stackelberg model and B responds. What are the respective quantities and profits of each firm now? Is it advantageous to move first? c. If the firms were able to collude, how much additional profit could they earn if they switch from simple single pricing to perfect price discrimination?
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.4P
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Transcribed Image Text:11. Suppose there is a duopoly of two identical firms, A and B, facing a market inverse
demand of P = 140 – 0.5Q, and cost functions of CA = 20QA and Cg = 20QB
respectively.
a. Find the Cournot-Nash equilibrium and profit for each firm.
b. Suppose that A acts as the leader in a Stackelberg model and B responds.
What are the respective quantities and profits of each firm now? Is it
advantageous to move first?
c. If the firms were able to collude, how much additional profit could they earn
if they switch from simple single pricing to perfect price discrimination?
d. Graph and label equilibria on the inverse demand.
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