[9] Cooperation among firms tends to be more difficult when: there are short retaliatory lags. firms sell differentiated products. when an industry trade association exists. All of the above A. В. С. D.

[9] Cooperation among firms tends to be more difficult when: there are short retaliatory lags. firms sell differentiated products. when an industry trade association exists. All of the above A. В. С. D.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter16: Government Regulation

Section: Chapter Questions

Problem 2E

See similar textbooks

Similar questions

An industry has four firms, each with a market share of 25 percent. There is no foreign competition, entry into the industry is difficult, and no firm is on the verge of bankruptcy. If two of the firms in the industry seek to merge, this action would most likely be opposed by the government because the Herfindahl index for the industry is Multiple Choice 2,500 and the merger would increase the index by 1000. 5,000 and the merger would increase the index by 2000. 3,000 and the merger would increase the index by 2000. 2,500 and the merger would increase the index by 1250.
Two firms, Firm 1 and Firm 2, compete by simultaneously choosing prices. Both firms sell an identical product for which each of 100 consumers has a maximum willingness to pay of $40. Each consumer will buy at most 1 unit, and will buy it from whichever firm charges the lowest price. If both firms set the same price, they share the market equally. Costs are given by C; (qi) = 16q¡ . Because of government regulation, firms can only choose prices which are integer numbers, and they cannot price above $40. Could you help me with these questions? a) If Firm 1 chooses Pi price? = 32, Firm 2's best response is to set what b) If Firm 2 chooses the price determined in the previous question, Firm 1's best response is to choose what price? c) If Firm 1 chooses p₁ = 9, Firm 2's best response is a range of prices. What is the lowest price in this range?
Two firms produce differentiated products. Firm 1 faces the demand curve Q1 = 75 -P1 + .5P2. (Note that a lower competing price robs the firm of some, but not all, sales. Thus, price competition is not as extreme as in the Bertrand model.) Firm 2 faces the analogous demand curve Q2 = 75 -P2 +.5P1. For each firm, AC =MC = 30. suppose that firm 2 acts as a price leader and can commit in advance to setting its price once and for all. In turn, firm 1 will react to firm 2’s price, according to the profit-maximizing response found earlier, P1 = 52.5 + .25P2. In committing to a price, firm 2 is contemplating either a price increase to P2 = $73 or a price cut to P2 =$67. Which price constitutes firm 2’s optimal commitment strategy? Justify your answer and explain why it makes sense.
There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities qA and qB. Inverse demand is P(qA + qB) = 18 − qA − qB and costs are C(q) = 3 ∗ q for both firms. Firm B is a domestic firm (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells qB units, firm B receives a payment of s ∗ qB from the government.) (d) Solve for the equilibrium outputs (q∗A, q∗b).(e) Solve for the equilibrium price.(f) Solve for firm B profits.
Assume you have the following information. Brand B unit price: $50. Brand B percent margin 10%. What is Brand B unit margin? Two firms compete with each other selling normal goods in a market vertically differentiated on price. Firm A sells 1000 units at a price of $500 and Firm B sells 500 units at a price of $1000. The revenue-based market share for Firm A is the same as the revenue-based market share for Firm B.
Give typing answer with explanation and conclusion to all parts Analysts have estimated the inverse market demand in a homogeneous-product Cournot duopoly to be P = 130 −2 (Q1 + Q2). They estimate costs to be C1(Q1) = 22Q1 and C2(Q2) = 34Q2. Determine the reaction function for each firm. Firm 1: Q1 = ___ − ___Q2 Firm 2: Q2 = ___ − ___ Q1 Calculate each firm’s equilibrium output. Firm 1: ___ Firm 2: ___ Calculate the equilibrium market price. ___ Calculate the profit each firm earns in equilibrium. Firm 1: $ ___ Firm 2: $ ___
The Hull Petroleum Company and Inverted V are retail gasoline franchises that compete in a local market to sell gasoline to consumers. Hull and Inverted V are located across the street from each other and can observe the prices posted on each other’s marquees. Demand for gasoline in this market is Q = 80 -9P, and both franchises obtain gasoline from their supplier at $2.75 per gallon. On the day that both franchises opened for business, each owner was observed changing the price of gasoline advertised on its marquee more than 10 times; the owner of Hull lowered its price to slightly undercut Inverted V’s price, and the owner of Inverted V lowered its advertised price to beat Hull’s price. Since then, prices appear to have stabilized. Under current conditions, how many gallons of gasoline are sold in the market, and at what price? Gallons sold: ? Price: $ ? How would prices differ if Hull had service attendants available to fill consumers’ tanks but Inverted V was only a self-service…
An industry is composed of Firm 1, which controls 70 percent of the market, Firm 2 with 15 percent of the market, and Firm 3 with 5 percent of the market. About 20 firms of approximately equal size divide the remaining 10 percent of the market. Calculate the Herfindahl-Hirschman Index before and after the merger of Firm 2 and Firm 3 (assume that the combined market share after the merger is 20 percent). Would you view a merger of Firm 2 with Firm 3 as procompetitive or anticompetitive? Explain.
Consider a homogeneous good industry (such as an agricultural product) with just two firms and a total market demand Q = 400−P, so the inverse demand is P = 400 − Q. Suppose both firms have a constant marginal cost equal to $100 per unit of output and a fixed cost equal to $10,000. Suppose that the firms compete by simultaneously setting price, not simultaneously setting output. That is, suppose we consider the Bertrand model instead of the Cournot. Show that the two firms must earn lower profits. Hint: Create a two-by-two game using two different prices for each firm. One price should be the Cournot price (the Cournot is price of the good when firms produce the Cournot output you found above, which is 100 and 100, so the price is P = 400 − 100 − 100 = 200). The second price should be under 200 and over 150. Then show that the Nash equilibrium of this game is the lower of the two prices. When calculating profits, assume that each firm has equal sales (one half of demand) if they charge…
There are two firms A and B. Firms compete in a Cournot Duopoly in Karhide. They set quantities qA and qB. Inverse demand isP(qA +qB) = 18−qA −qB and costs are C(q) = 3∗q for both firms. Firm B is a domestic firm (in Karhide,) and firm A is a foreign firm (from Orgoreyn.) The government of Karhide engages in a strategic trade intervention by giving firm B a per unit subsidy of s. (That is, when firm B produces and sells qB units, firm B receives a payment of s ∗ qB from the government.) We begin by examining the model with an unspecified s ≥ 0. A)Find profit functions for both firms. B)Use first order conditions to find each firm’s best response function.
Consider a Cournot Oligopoly. One firm has costs C1(Q1) = 12Q1 while the other firm’s cost function is C2(Q2) = 10Q2. The demand for both firms’ products Q=Q1 +Q2 isQD(P)=200−2P. (a) Determine the equilibrium price P, the market shares s1, s2, and the quantities Q1, Q2 produced by both firms. (b) Suppose more firms with the lower cost technology, i.e., with cost function Ci(Qi) = 10Qi enter the market. How many firms with this technology must be in the market such that firm 1’s profit becomes negative. In other words, suppose there is one firm with the high costs, and n firms with the low costs. At what level n will profits of the high-cost firm be negative?
Two firms produce a homogeneous product. Let p denote the product’s price. The output levelof firm 1 is denoted by q1, and the output level of firm 2 by q2. The aggregate industry output isdenoted by Q, Q = q1 + q2. The aggregate industry demand curve for this product is given byp = 70 − Q.Assume that the unit cost of firm 1 is c1 = 10 and the unit cost of firm 2 is c2 = 20.a. Suppose the firms move simultaneously and compete on quantities. Derive the firms’ bestresponse functions, and find the Cournot-Nash equilibrium. What are the profits of thefirms?b. Suppose the firms move sequentially with firm 1 setting its level of output before firm 2.Find the Stackelberg-Cournot equilibrium. What are the profits of firm 1 and firm 2?c. Now assume that firm 2 sets its level of output before firm 1. Find the Stackelberg-Cournotequilibrium. What are the profits of firm 1 and firm 2? Is there a difference in your findingsbetween part b and c? Explain why.