Determine if the statements are true or false. Justify your answer.1.In a Stackelberg duopoly, in which firms produce substitutable products and choose quantities,the leader of the industry enjoys a first mover advantage in the subgame perfect Nash equilibrium.2.) Consider a two stage sequential price decision duopoly, where firms choose prices when producingsubstitutable products and constant unit costs, where there is a leader and a follower. If the firms areasymmetric, in the sense that their unit costs are sufficiently different, then in the subgame perfect Nashequilibrium the high-cost firm has a first mover advantage, whereas the low-cost firm has a second moveradvantage.

There are different forms of market under duopoly system, such as stackelberg duopoly, cournot…

Determine if the statements are true or false. Justify your answer. 1. In a Stackelberg duopoly, in which firms produce substitutable products and choose quantities, the leader of the industry enjoys a first mover advantage in the subgame perfect Nash equilibrium.

Determine if the statements are true or false. Justify your answer. 1. In a Stackelberg duopoly, in which firms produce substitutable products and choose quantities, the leader of the industry enjoys a first mover advantage in the subgame perfect Nash equilibrium.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.5P

See similar textbooks

Similar questions

Answer the given question with a proper explanation and step-by-step solution. Three firms produce identical products and compete in a market where the inverse demand function is P(q1, q2, q3) = 78 − q1− q2− q3. Each has a per-unit cost of 14 and zero fixed cost. They simultaneously choose quantities. In scenario (a), find the Nash equilibrium of this game and let A = firm 2's profit in the Nash equilibrium. In scenario (b), assume that the firms form a cartel, i.e., they act as a monopoly and split the profit evenly. If the total quantity produced by the cartel is Q, then the inverse demand is P(Q) = 78 - Q. Let B = firm 2's profit in the cartel. Calculate the value of A - B and enter your answer in the box below. Please round your answer to 3 decimal places (e.g., write 4/3 as 1.333).
4)The result with unspecified N firms can be applied to N approaching infinity. Q2) Which of the following statements about the classic Cournot duopoly model is incorrect? 1)The products of the two firms are homogeneous. 2)It is a static game with complete information. 3)The two firms decide on their prices and let their quantities be dictated demand conditions. 4)There exist examples that have unique Nash equilibrium points
How would the Cournot equilibrium change in the airline example if American's marginal cost were $90 and United's were $180? The demand the duopoly quantity-setting firms face is Q=339−p with an inverse demand function of p=339−1qA −1qU where qA is the quantity produced by American and qU is the quantity produced by United. The Cournot-Nash equilibrium occurs where qA equals ? enter your response here and qU equals? enter your response here. (enter numeric responses using integers) Furthermore, the equilibrium occurs at a price of ? (round your answer to the nearest penny)
Consider duopoly model with firm 1 and firm 2. Firms have constant marginal costs, c_1 = c_2 = 10. Demand functions are given by equations: Q_1= (7*100) - 2*P_1 + P_2 Q_2 = (7*100) + P_1 - 2*P_ 2 Note that * signifies the multiplication sign. Assume that firm 1 chooses its price first. Then, after observing firm 1’s price, firm 2 chooses its price. Find the prices each firm chooses in the roll-back equilibrium of this game. Is it good to be a leader or a follower in this game? Why?
Consider a duopolistic market in which the two identical firms compete by selecting their quantities. The inverse market demand is P(Q) = 210−Q and each firm has a marginal cost of $15 per unit. Assume that fixed costs are negligible for both firms. Cournot Model Determine the Nash-Cournot equilibrium for this market.(Enter your responses rounded to two decimal places.) Firm 1's quantity: q1= ? units. Firm 2's quantity: q2 = ? units. Market price: P= ? Stackelberg Model Determine the Nash-Stackelberg equilibrium for this market, assuming that Firm 1 is the Stackelberg leader. (Enter your responses rounded to two decimal places.) Firm 1's quantity: q1 = ? units Firm 2s quantity: q2 = ? units. Market price: P = ?
Consider a Duopoly model, in which two firms decide a quantity sequentially. For the convenience, let's say Firm 1 is a dominant firm and Firm 2 is a follower. The market demand is given by P=110 - 5Q, where Q is the total output (i.e., Q=Q1+Q2). Each firm has an identical cost function, TCi=7Qi, i=1, 2. Each firm maximizes its profit by choosing the quantity. In this Stackelberg equilibrium, Firm 1 will sell how many units.
Joe and Rebecca are small-town ready-mix concrete duopolists. The market demand function is Qd = 10,000 – 100P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $25 per cubic yard. Suppose that Joe and Rebecca compete in quantities and competition in this market is described by Cournot model. What are Joe and Rebecca’s Nash equilibrium outputs? What is the resulting price? What do they each earn as profit? How does the price compare to the marginal cost? Joe and Rebecca are small-town ready-mix concrete duopolists. The market demand function is Qd = 10,000 – 100P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $25 per cubic yard. Suppose that Joe and Rebecca compete in quantities and competition in this market is described by Cournot model. What are Joe and Rebecca’s Nash equilibrium outputs? What is the resulting price? What do they each…
Suppose that two firms produce mountain spring water and the market demand for mountain spring water is given as follows: P= 254 - 91 - 92 Firm 1 and Firm 2 have a MC = 50 a) Find the Cournot-Nash equilibrium price and quantity of each firm. b) Assume now that firm 1 becomes the Stackelberg leader. What will be the market price, output by each firm? Compared to part a, who gains? c) If Firm 1 chooses a quantity, then Firm 2 chooses a quantity (having observed Firm 1's quantity), then Firm 1 has an opportunity to revise its quantity (having observed Firm 2's quantity), then payoffs are determined, does either firm stand to gain relative to the case of simultaneous quantity choice? Why or why not? (hint: there is no need to do any calculation here).
Three firms produce identical products and compete in a market where the inverse demand function is P(q1, q2, q3) = 78 − q1− q2− q3. Each has a per-unit cost of 14 and zero fixed cost. They simultaneously choose quantities. In scenario (a), find the Nash equilibrium of this game and let A = firm 2's profit in the Nash equilibrium. In scenario (b), assume that the firms form a cartel, i.e., they act as a monopoly and split the profit evenly. If the total quantity produced by the cartel is Q, then the inverse demand is P(Q) = 78 - Q. Let B = firm 2's profit in the cartel. Calculate the value of A - B and enter your answer in the box below. Please round your answer to 3 decimal places (e.g., write 4/3 as 1.333).
Consider a Cournot Duopoly model. The inverse demand for their products is given byP = 200 − 6Q, where Q is the total quantity supplied in the market (that is, Q = Q1 + Q2). Each firm has an identical cost function, given byT Ci = 2Qi, for i = 1, 2.(a) In the Cournot model, what does each firm choose?(b) What is the timing of each firm’s decision?(c) Find the Nash equilibrium quantities (Q∗1, Q∗2)?(d) What is the equilibrium price? Just help with c and d here please
Continuous Strategy in Static Game: Bertrand and Cournot Model Consider the Cournot duopoly with linear demand function ? = 2000 − 2Q, where P is the price and Q = q1 + q2 is the total supply. Firm 1 and firm 2 has constant marginal cost of 600. Just answer the A, B and C, thank you bartleby! a. If firm compete in price, draw in detail the best response of each firm.b. Determine and explain the Bertrand equilibrium.c. What is the equilibrium quantity and how much profit for each firm?d. Explain the Bertrand Paradox in (c)!e. If firm 1 has capacity of production 450 and firm 2 has capacity of 200. Determine the Bertrand equilibrium.f. What is the equilibrium quantity, and how much profit for each firm?g. Is there any paradox in (f)?