2. Walmart (firm 1) and Amazon (firm 2) are a duopoly in the grocery market. They are faced with an inverse demand of P(Q1,Q2) = 4 – 2(Q1 + Q2) and total costs of TC(Q;) = 2Q?, i = 1, 2. Note that the marginal cost is not constant! 1. Obtain the Cournot equilibrium quantities and profits.

2. Walmart (firm 1) and Amazon (firm 2) are a duopoly in the grocery market. They are faced with an inverse demand of P(Q1,Q2) = 4 – 2(Q1 + Q2) and total costs of TC(Q;) = 2Q?, i = 1, 2. Note that the marginal cost is not constant! 1. Obtain the Cournot equilibrium quantities and profits.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.4P

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The figure below shows the market conditions facing two firms, Brooks, Inc., and Spring, Inc., in the domestic market for large utility pumps. Each firm has constant long-run costs, so that MC0 = AC0. As competitors in a duopoly, there are a number of models to determine output and prices. Assume that the Bertrand duopoly model applies, so that they both set price equal to their marginal cost. Initial output in this market will be 16,000 per year (this is split between the two firms), at a price of $300. Suppose that Brooks, Inc. and Spring, Inc. form a joint venture, River Company, whose utility pumps replace the output sold by the parent companies in the domestic market. Assuming that River Company operates as a monopolist and that its costs equal MC0 = AC0, what is: (b) The price?
The figure below shows the market conditions facing two firms, Brooks, Inc., and Spring, Inc., in the domestic market for large utility pumps. Each firm has constant long-run costs, so that MC0 = AC0. As competitors in a duopoly, there are a number of models to determine output and prices. Assume that the Bertrand duopoly model applies, so that they both set price equal to their marginal cost. Initial output in this market will be 16,000 per year (this is split between the two firms), at a price of $300. Suppose that Brooks, Inc. and Spring, Inc. form a joint venture, River Company, whose utility pumps replace the output sold by the parent companies in the domestic market. Assuming that River Company operates as a monopolist and that its costs equal MC0 = AC0, what is: (e) The resulting deadweight loss from River Company operating as a monopoly?
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