Consider the following Cournot-Stackelberg duopoly model on export subsidies: There are three countries, H, F and the rest of the world (ROW). Both H and F produce and export a product to the ROW. Let the exports of the H firm be x units and the exports of the F firm be y units. For simplicity, assume that x and y are produced only for exports and are not consumed domestically in these two countries. Both countries have the same constant marginal cost C. All assumptions and notations are the same as those in our lecture notes. Import Demand from the ROW: P(x+y) = 100 - x -y Marginal cost: C - 25 The Nash equilibrium levels of subsidies are sH = and sF = Oa 0:0 Ob. 15; 15 Oc. 20, 20 Od. None of the answers above is correct.

Consider the following Cournot-Stackelberg duopoly model on export subsidies: There are three countries, H, F and the rest of the world (ROW). Both H and F produce and export a product to the ROW. Let the exports of the H firm be x units and the exports of the F firm be y units. For simplicity, assume that x and y are produced only for exports and are not consumed domestically in these two countries. Both countries have the same constant marginal cost C. All assumptions and notations are the same as those in our lecture notes. Import Demand from the ROW: P(x+y) = 100 - x -y Marginal cost: C - 25 The Nash equilibrium levels of subsidies are sH = and sF = Oa 0:0 Ob. 15; 15 Oc. 20, 20 Od. None of the answers above is correct.

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

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 1.3CE

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You are the manager of the only firm worldwide that specializes in exporting fish products to Japan. Your firm competes against a handful of Japanese firms that enjoy a significant first-mover advantage. Recently, one of your Japanese customers has called to inform you that the Japanese legislature is considering imposing a quota that would reduce the number of pounds of fish products you are permitted to ship to Japan each year. Your first instinct is to call the trade representative of your country to lobby against the import quota. Is following through with your first instinct necessarily the best decision? Please start your answer with the WORD YES OR NO, THEN PLEASE EXPLAIN. *
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