Consider a market with two firms. Call them firm 1 and firm 2. The demand function describing the market is P = 216 – 0.4Q. Firms are initially identical, with the cost function C(q) = 140 + 40q. Calculate the total profits in the market. Under what conditions, the two firms may succeed to collude? How much would each firm earn if they could collude?
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Consider a market with two firms. Call them firm 1 and firm 2. The demand function describing the market is P = 216 – 0.4Q. Firms are initially identical, with the cost function C(q) = 140 + 40q.
Calculate the total profits in the market. Under what conditions, the two firms may succeed to collude? How much would each firm earn if they could collude?
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- Consider a market for crude oil production. There are two firms in the market. The marginal cost of firm 1 is 20, while that of firm 2 is 20. The marginal cost is assumed to be constant. The inverse demand for crude oil is P(Q)=200-Q, where Q is the total production in the market. These two firms are engaging in Cournot competition. Find the production quantity of firm 1 in Nash equilibrium. If necessary, round off two decimal places and answer up to one decimal place.Two firms compete in selling homogeneous goods. They choose their output levels q1 and q2 simultaneously and face demand curve P=80-6Q, where Q=q1+q2. The total cost function of firm 1 is C1=8q1 and the total cost function of firm 2 is C2=32q2+2/3. a) Find and draw the reaction curves of the two firms. b) Compute equilibrium quantities, price and profits. Suppose now that firm 2, thanks to a technological innovation, becomes more efficient. The new total cost function of firm 2 is C2= 8q2 c) Compute the new equilibrium quantities, price and profits.Suppose that two identical firms produce widgets and that they are the only firms in the market. The average and marginal cost is €60 for each firm. Price is determined by the following demand curve: P = 300 – Q where Q = Q1 + Q2. Suppose firm 1 is the leader and firm 2 is the follower. The output produced by each firm in a Stackelberg equilibrium is A. Firm 1 will produce 60 and Firm 2 will produce 120 B. Firm 1 will produce 80 and Firm 2 will produce 40 C. Firm 1 will produce 120 and Firm 2 will produce 40 D. Firm 1 will produce 120 and Firm 2 will produce 60
- Exercise 6.8. Two companies with cost functions C1 (q1 )=5q1 and C2 (q2)= 0.5 q2 ² supply the to the same market. If the inverse market demand function is given by P = 100 - 0,5Q , where Q = q₁ + q₂ , find a) The production level of each firm, the price and the profits if the companies compete according to the Cournot model. (b) The level of production of each undertaking, the price and the profits if the undertakings agree to jointly maximise their profits. Show the results with the help of graphs.. The market for widgets consists of two firms that produce identical products. Competition in the market is such that each of the firms independently produces a quantity of output, and these quantities are then sold in the market at a price that is determined by the total amount produced by the two firms. Firm 2 is known to have a cost advantage over firm 1. A recent study found that the (inverse) market demand curve faced by the two firms is P = 280 – 2(Q1 + Q2), and costs are C1(Q1) = 3Q1 and C2(Q2) = 2Q2. a. Determine the marginal revenue for each firm. b. Determine the reaction function for each firm.There are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well Based on a maximin strategy, what will be the outcome? (explain the decision step by step)
- There are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well Construct the normal form for this game. Construct the extensive form for this game.There are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well What outcomes, if any, are Nash equilibria? (explain the decision step by step) Based on a maximin strategy, what will be the outcome? (explain the decision step by step)There are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well Construct the normal form for this game Construct the extensive form for this game What outcomes, if any, are Nash equilibria? (explain the decision step by step) Based on a maximin strategy, what will be the outcome? (explain the decision step by step)
- There are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well Construct the extensive form for this gameThere are two firms that are considering entering a new market, and must make their decision without knowing what the other firm has done. Unfortunately the market is only big enough to support one of the two firms. If both firms enter the market then they will each make a loss of £20 million. If only one firm enters the market, that firm will earn a profit of £80 million, and the other firm will just break even. If both firms do not enter the market, then they will just break even as well Construct the normal form for this game?Two firms sells an identical product. The demand function for each firm is given: Q = 20 - P, where Q = q1 + q2 is the market demand and P is the price. The cost function for reach firm is given: TCi = 10 + 2qi for i = 1, 2. a) If these two firms collude and they want to maximize their combined profit, how much are the market equilibrium quantity and price? b) If these two firms decide their production simultaneously, how much does each firm produce? What is the market equilibrium price? c) If Firm 1 is a leader who decides the production level first and Firm 2 is a follower, how much does each firm produce? What is the market equilibrium price?