ii)Consider two firms producing differentiated products and competing on price choice.Their demand functions are given below9, = 100 – 4p, + P2TC = 20q,TC, = 20q,Their total costs are given as;9, = 100 – 4p, + P,Determine the collusion equilibrium (price, quantity and profit) ( .

First, we find the inverse demand functions for both firms. 4p1 - p2 = 100 - q1 -p1 + 4p2 = 100 - q2…

ii) Consider two firms producing differentiated products and competing on price choice. Their demand functions are given below 9, = 9, = 100 – 4p, + Pi 100– 4p, + P2 TC = 20q, %3D Their total costs are given as; TC, = 204, %3D %3D Determine the collusion equilibrium (price, quantity and profit) ( .

ii) Consider two firms producing differentiated products and competing on price choice. Their demand functions are given below 9, = 9, = 100 – 4p, + Pi 100– 4p, + P2 TC = 20q, %3D Their total costs are given as; TC, = 204, %3D %3D Determine the collusion equilibrium (price, quantity and profit) ( .

Survey of Economics (MindTap Course List)

9th Edition

ISBN:9781305260948

Author:Irvin B. Tucker

Publisher:Irvin B. Tucker

Chapter9: Monopolistic Competition And Oligoply

Section: Chapter Questions

Problem 19SQ

See similar textbooks

Similar questions

Additional Problem 3: Assume two companies (C and D) are Cournot duopolists that produce identical products. Demand for the products is given by the following linear demand function: ? = 600 − ?C − ?D where ?C and ?D are the quantities sold by the respective firms and P is the price. Total cost functions for the two companies are ??C= 25,000 +100?C 2 ??D = 20,000 + 125?D c. Determine the equilibrium price and quantities sold by each firm. d.Determine the profits for the market as well as eachfirm.
Initially there are six firms producing differentiated products. The demand function for the good produced by firm i, i=1,2..,6, is given by qi = 10-2pi+0.3 summation pj where the sum is taken over the five prices other than firm i. Each firm has the same marginal cost c. The firms choose prices simultaneously; that is, they are differentiated products Bertrand competitors. (a) Solve for the symmetric Nash equilibrium prices. (b) Suppose that you observe each firm to set a price of 4.8. What must c be? (c) Suppose that two of the six firms merge to become a single firm. The firm continues to produce both goods. Using the marginal cost you found in (b), derive the new post-merger Nash equilibrium prices.
Q. Three firms operate in a market with a Demand function p = 169 - 2Q. All three firms have identical Cost functions: TC = 1200 - 95q + 2q2.i) Given that the firms are able to collude, what is the equilibrium market price and output?ii) If all of the firms cheat and each increases output by two units, what would be the new equilibrium price and the impact on an individual firm’s profits?
Two firms - firm 1 and firm 2 - share a market for a specific product. Both have zero marginal cost. They compete in the manner of Bertrand and the market demand for the product is given by: q = 20 − min{p1, p2}. 1. What are the equilibrium prices and profits? 2. Suppose the two firms have signed a collusion contract, that is, they agree to set the same price and share the market equally. What is the price they would set and what would be their profits? For the following parts, suppose the Bertrand game is played for infinitely many times with discount factor for both firms δ ∈ [0, 1). 3. Let both players adopt the following strategy: start with collusion; maintain the collusive price as long as no one has ever deviated before; otherwise set the Bertrand price. What is the minimum value of δ for which this is a SPNE. 4. Suppose the policy maker has imposed a price floor p = 4, that is, neither firm is allowed to set a price below $4. How does your answer to part 3 change? Is it now…
Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=200-Qa-Qb where QAQA and QBQB, are the quantities sold by the respective firms and P is the selling price. The total cost functions for the two companies are TCa=1,500+55Qa+Qa2 TCb=1,200+20Qb+2Qb2 Assume that the firms act independently as in the Cournot model (i.e., each firm assumes that the other firm’s output will not change). For Company A, the long-run equilibrium output is and the selling price is $ . For Company B, the long-run equilibrium output is , and selling price is $ . At the equilibrium output, Company A earns total profits of $ and Company B earns total profits of $ . Therefore, the total industry profits are $ .
Suppose the inverse demand function for two Cournot duopolists is given by P = 10 – (Q1 + Q2) and their costs are zero. What is each firm’s marginal revenue and reaction functions? Determine the Cournot equilibrium outputs and equilibrium price. What is the implication of this model?
Suppose the inverse demand function for two Cournot duopolists is given by P = 10 – (Q1 + Q2) and their costs are zero. A. What is each firm’s marginal revenue and reaction functions? B. Determine the Cournot equilibrium outputs and equilibrium price. What is the implication of this model?
Suppose three firms compete in a homogeneous-product Cournot industry. The market elasticity of demand for the product is −2, and each firm’s marginal cost of production is $50. What is the profit-maximizing equilibrium price?
Two firms are producing identical goods in a market characterizedby the inverse demand curve P = 60 - 2Q, where Q is the sum of Firm 1's and Firm 2's output, q1 + q2. Each firm's marginal cost is constant at $12, and fixed costs are zero. Answer the following questions, assuming that the firms are Cournot competitors. In this case, the market price is $
Assume that two companies (C and D) are duopolists that produce identical products. Demand for the products is given by the following linear demand function: P=600−QC−QD�=600−��−�� where QC�� and QD�� are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCC=25,000+100QCTC�=25,000+100�� TCD=20,000+125QDTC�=20,000+125�� Assume that the firms act independently as in the Cournot model (i.e., each firm assumes that the other firm’s output will not change). For Company C, the long-run equilibrium output is , and the selling price is . For Company D, the long-run equilibrium output is , and the selling price is . At the equilibrium output, Company C earns total profits of , and Company D earns total profits of
Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function: P=400−QA−QBP=400−QA−QB where QAQA and QBQB are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are TCA=1,500+110QA+QA2TCA=1,500+110QA+QA2 TCB=1,200+40QB+2QB2TCB=1,200+40QB+2QB2 Assume that the firms form a cartel to act as a monopolist and maximize total industry profits (sum of Firm A and Firm B profits). In such a case, Company A will produce units and sell at .Similarly, Company B will produce units and sell at . At the optimum output levels, Company A earns total profits of and Company B earns total profits of . Therefore, the total industry profits are . At the optimum output levels, the marginal cost of Company A is and the marginal cost of Company B is . The following table shows the long-run equilibrium if the firms act independently, as in…
Consider a duopoly where firms compete for market share by setting prices. The firms produce differentiated products and face the following demand functions where q is output and P is the price in dollars. q1 = 100 – 2P1 + 2P2 Demand Function for Firm 1 q2 = 120 – 4P2 + P1 Demand Function for Firm 2 Suppose that firm 1 is able to produce output at a constant marginal cost of $30 and that firm 2 is able to produce output at a constant marginal cost of $20. Both firms operate with no fixed costs. Derive the best response function for firm 1. Derive the best response function for firm 2.