Firms 1 and 2 compete in a Cournot duopoly. If firm 2 adopts a strategy that raises firm 1's marginal cost: firm 2's reaction function will shift up. firm 1's reaction function will shift down. firm 2's reaction function will shift down. firm 1's reaction function will shift up.
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- In the initial Cournot oligopoly equilibrium, both firms have constant marginal costs, m, and nofixed costs, and there is a barrier to entry. Determine what happens to the best-response functionof firms if both firms now face a fixed cost of FSuppose two firms, Firm A and Firm B, are competing by setting quantities (Cournot competition). The two firms choose between producing 500 units or 1000 units. If the total output is 1000 units, the price is $50 per unit; if total output is 1500 units, the price is $25 per unit; if total output is 2000 units, the price is $10 per unit. Based on the information provided, fill in the firms’ revenues in the payoff matrix below with Firm A choosing the row and Firm B choosing the column.Suppose Telkomsel and Indosat are the only two firms in the internet market. They face the following payoff when the want to invest in the research budget: When both companies invest in small budget, Telkomsel will gain Rp 40 billion and Indosat will gain Rp 50 billion. When both of them invest in large budget, Telkomsel will gain Rp 20 billion and Indosat will gain Rp 30 billion. When Telkomsel invest in large budget and Indosat in small budget, Telkomsel will gain Rp 30 billion and Indosat will gain zero. When Telkomsel invest in small budget and Indosat in large budget, Telkomsel will gain zero and Indosat will gain Rp 70 billion. a). Draw the payoff matrix b). Is there a Nash Equilibrium for that case? Explain.
- Two firms compete in a market to sell a standardized product and the inverse demand in the market is P = 400 – Q where Q = Q1 + Q2. The cost functions are: C1(Q1) = 8Q1 and C2(Q2) = 36Q2. If this market is characterized by a Stackelberg oligopoly, what is the optimal amount for the follower (firm 2) to produce?In a Cournot duopoly firm 1’s best-response function is downward sloping because when firm 2 produces more: A) Firm 1’s marginal cost goes up, so firm 1 produces less. B) Firm 1's average cost goes up, so firm 1 produces less. C) Firm 1’s marginal revenue goes down, so firm 1 produces less. D) Firm 1’s total cost goes up, so firm 1 produces less.What is the duopoly Nash-Cournot equilibrium if the market demand function is Q = 500 - 10p and each firm’s marginal cost is 5¢ per unit?
- Refer to the normal-form game of price competition in the payoff matrix below Firm B Low Price High Price Firm A Low Price 0, 0 50, −10 High Price −10, 50 20, 20 Suppose the game is infinitely repeated, and the interest rate is 20 percent. Both firms agree to charge a high price, provided no player has charged a low price in the past. This collusive outcome will be implemented with a trigger strategy that states that if any firm cheats, then the agreement is no longer valid, and each firm may make independent decisions. Will the trigger strategy be effective in implementing the collusive agreement? Please explain and show all necessary calculations.Consider an oligopoly with three firms that produce a homogeneous product. The market demand for the industry is Q = 120 - P. Market supply is determined by the output decisions of the firms. That is, Q = q1 + q2 + q3, where qi is the output of firm i. Each firm can produce at zero cost, and the firms behave non-cooperatively in deciding their output levels.A) Find the Cournot equilibria in this industry.B) What are the profits of each firm?C) Would (any) two firms have an incentive to merge, effectively converting the industry into a duopoly? (Justify your answer.)There are two firms in an industry, Firm A and Firm B. If firm A and firm B both advertise, they each will earn $5 million in profits. If neither firm advertises, they will each earn $10 million in profits. However, if one firm advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million. List all Nash equilibrium to this game. Both firms advertise Firm A advertises and Firm B does not Firm B advertises and Firm B does not Neither firm advertises No Nash equilbrium exists
- Two firms operate in a Cournot Duopoly with an inverse market demand function: P = 180 – 3Q, where Q = q1 + q2. Firm 1 has a total cost structure; TC1 = 50 + 2q1 + 2q1 2 and firm 2 had a total cost structure: TC2 = 100 + 3q2 + 3q2 2 . Answer the following questions: a. If both firms wish to compete, what is the optimal quantity for each firm (qi) and the market price? b. What are the profits for each firm from the strategy in part a? c. If both firms choose to collude and not directly compete, what is the new price, quantity, and profits for each firm?Alcoa and Kaiser, duopolists in the market for primary aluminum ingot, choose prices of their 500 foot rolls of sheet aluminum on the first day of the month. The following payoff table shows their monthly payoffs resulting from the pricing decisions they can make. Suppose Alcoa and Kaiser repeat their pricing decision on the first day of every month. Suppose they have been cooperating for the past few months, but now the manager at Kaiser is trying to decide whether to cheat or to continue cooperating. Kaiser’s manager believes Kaiser can get away with cheating for two months, but he also believes that Kaiser would be punished for the next two months after cheating. After punishment, Kaiser’s manager expects the two firms would return to cooperation. Kaiser’s manager ignores the time-value of money and does not discount future benefits or costs. Will Kaiser cooperate or cheat? Explain.Alcoa and Kaiser, duopolists in the market for primary aluminum ingot, choose prices of their 500 foot rolls of sheet aluminum on the first day of the month. The following payoff table shows their monthly payoffs resulting from the pricing decisions they can make. Suppose Alcoa and Kaiser repeat their pricing decision on the first day of every month. Suppose they have been cooperating for the past few months, but now the manager at Kaiser is trying to decide whether to cheat or to continue cooperating. Kaiser’s manager believes Kaiser can get away with cheating for two months, but he also believes that Kaiser would be punished for the next two months after cheating. After punishment, Kaiser’s manager expects the two firms would return to cooperation. Kaiser’s manager ignores the time-value of money and does not discount future benefits or costs. 4. Suppose you were asked to manage a golf course that was currently charging a uniform price. Would you suggest that the course continue…
