Q: Qd1 = 30-8P₁ +4P₂ 2s1 = -60+6P₁ Qd2 = 200+4P₁ − 4P₂ - Qs2 = -40+6P₂
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arises when firms act together to reduce output and keep prices high. O Collateral O A cartel O A
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- When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that the cartel could stay together over the long term-that the incentives for individual members. to cheat would become too strong. More than fort),r years later, OPEC still exists. Why do you think OPEC has been able to beat the odds and continue to collude? Hint: You may wish to consider non-economic reasons.Suppose that there are two firms in a market, firm 1 and firm 2. The marketis declining in size. The game starts in period 0, and the firms can compete in periods 0, 1,2, 3, ... (i.e., indefinitely) if they so choose. Duopoly profits in period t for firm 1 are equalto 105 −10t, and they are 10.5 −t for firm 2. Monopoly profits (those if a firm is the onlyone left in the market) are 510 −25t for firm 1 and 51 −2t for firm 2. At the start of eachperiod, each firm must decide either to “stay in” or “exit” if it is still active (they do sosimultaneously if both are still active). Once a firm exits, it is out of the market forever andearns zero in each period thereafter. Firms maximize their (undiscounted) sum of profits.What is this game’s subgame perfect Nash equilibrium?Question 1 (40 points) Consider a homogeneous duopoly market where two firms compete in prices. Demand is given by D 8-2p, where p is price. Marginal cost of production is 2. a)lf the individual capacity of both firms is 2, is there an equilibrium in pure strategies? If so, what are the equilibrium prices? If not, provide a proof. b) Consider then that a third firm enters the market and that all three firms have a capacity of 2. Does an equilibrium in pure strategies exist? If so, what are the equilibrium prices? If not, why not? c) Does you answer under b) change if the firms' capacities are respectively equal to 1, 2 and 3?.
- Suppose three Cournot competitors, each with costs Ci = 30qi, face an inverse market demand curve of P = 480 – 4Q. Suppose merging will not change costs. a. Find profits for the three firms. Note: Don’t round your answers. How will the profits change for F1 and for F2|3 if F2 and F3 merge? b. Suppose that after the merger occurs, F1 and the new firm F2|3 successfully collude at setting the monopoly price and output, and splitting the resulting monopoly profits. How, if at all, does this change the impact of the merger on F1 and on the merged firm?Explain what is Oligopoly and duopoly? Are firms in Oligopoly large firms or small firms? What is product differentiation, price discrimination and profit maximization under Oligopoly? Give two examples each of product differentiation and price discrimination. What is the optimum point of production and minimum cost point of a firm under Oligopoly? Explain and draw AR and MR curves as (a) kinked demand curve; (b) Collusion (cartels) and (c) Price leadership model.The Competition Bureau in Canada wants to increase competition and reduce monopoly power. Thus it it worries about industry concentration in Canada. Let's assume that the Canadian halibut processing industry there are only two firms(duopoly). Under such a market structure, if one of the halibut processing firm increases its price, then the other firm in the halibut processing industry can: keep the price of its processed halibut constant and thus increase its market share. keep its price of its processed halibut constant and thus decrease its market share. decrease its price of its processed halibut and thus decrease its market share. try to achieve economies of scale. increase its price of its processed halibut and thus increase its market share.
- MR =MC =D is the condition under Select one: Oa. Oligopoly O b. Monopolistic competition O c. Pure monopoly O d. Pure competitiond. How much output would be produced if the market were monopolized?e. Suppose you and your rival agree to a collusive arrangement in which each firm produces half of the monopoly output. (1) What is your output under the collusive arrangement? (2) What is your optimal output if you believe your rival will live up to the agreement?Suppose oil production in the Gulf of Mexico was a symmetric horizontal oligopoly in Cournot competition. Assume there are two producers, each with a constant marginal cost of production of $50 per barrel. Let the demand function for oil in the region be D(p) = 12000 – 20p, where demand is measured in barrels per day. (You will need to calculate inverse demand from demand before moving on). What would the perfectly competitive equilibrium price and quantity be? What would be the consumer surplus and producer surplus? Draw each firm’s residual inverse demand curve. Calculate the Cournot-Nash equilibrium price and quantity. What is the total consumer surplus, total producer surplus across the two firms, and deadweight loss?
- Only typed answer In a duopoly, each firm has marginal cost MC = 100, and market demand is Q = 500 - 0.5p. Assuming average cost is the same as marginal cost. In which oligopoly, Cournot or Stackelberg, do firms have more market power? a. Cournot since the Lerner Index in the Cournot model is twice as much as that in the Stackelberg model. b. Stackelberg since the Lerner Index in the Cournot model is twice as much as that in the Stackelberg model. c. Cournot since the Lerner Index in the Cournot model is about 1.08 times as much as that in the Stackelberg model. d. Stackelberg since the Lerner Index in the Cournot model is about 1.08 times as much as that in the Stackelberg model.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. If I assume in the bottled spring water production industry oligopoly exists amongst 20 firms how do I solve for the cournot quantities,prices and profits at equilibirum ? If ten firms are merged how will I calcuate the new Cournot equilibrum quantities, prices and profits for above?There is much evidence that large firms with considerable market power (firms such asmonopolies) may not maximize profits but may pursue quite different objectives such asgrowth or sales revenue maximization. What are the arguments put forward to defendmonopoly? Name any 5 Generally, the aim of a business is to maximize profit. Which point should a firm operateat in order to achieve maximum profit? By making use of a graph indicate clearly the pointat which a firm makes maximum profit and a point where a firm increase their output inorder to enhance profit as well as well as the points where they should reduce theirproduction if they want to enhance profit
