abTOGETHEDFigure 4DLFdildeParagraphLowprice414. In an oligopoly, the ideal pricing strategy is for all firms to charge the high price. Due tothe structure of oligopoly markets, charging the low price is considered cheating, whenthere is more than one pricing-period expected, because competitors are likely to be shutout of the market in the short run. Assume that Dr. Fine and Dr. Feelgood are the onlytwo medical doctors offering immediate walk-in medical services in a small rural town.Therefore, they operate in a two-firm oligopoly. Each doctor can charge either a highprice or a low price for a standard medical visit. Figure 4 shows the possible profits forDr. Fine and Dr. Feelgood, based on each doctor's pricing strategy.HighpriceDr FeelgoodLow price$35 profit$35 profitTT Normal 1 No Spaci... Heading 1 Heading 2IT$45 profit$0 profitHigh price$0 profit$45 profit1$38 profit$38 profit244Il TitlePENGELStyles1 above explain why the Nash EquilibriumAUD AaBb CcD AaBb CcDEmphasisIT Subtitle Subtle Em...A abChangeStyles -ReplaceSelect -Editing libliFineParagraphEnterresponsehere.EnterFeelgood responsehere.FIRSTPeriodCharges(high or low)b. Using the information in Question 4 and Figure 4 above, complete the following table todepict the two-period pricing situation when Dr. Fine always plays "tit-for-tat" and Dr.Feelgood always plays "tit-for-tat."FIRSTPeriodPayoffsEnterresponsehere.EnterNormal I No Spaci... T Heading 1 T Heading 2responsehere.SECONDPeriodCharges(high orlow)Enterresponsehere.Enterresponsehere.SECONDPeriodPayoffsEnterresponsehere.Enterresponsehere.TOTALPayoffsEnterresponsehere.EnterT Titleresponsehere.Stylesc. Using the information in Question 4 and Figure 4 above, complete the following table toSit for at and DrT SubtitleAdBbCcD! AaBbCSubtle Em... Empha

Nash equilibrium is the equilibrium in game theory where no player wants to deviate. Given pay-off…

In an oligopoly, the ideal pricing strategy is for all firms to charge the high price. Due to the structure of oligopoly markets, charging the low price is considered cheating, when there is more than one pricing-period expected, because competitors are likely to be shut out of the market in the short run. Assume that Dr. Fine and Dr. Feelgood are the only two medical doctors offering immediate walk-in medical services in a small rural town. Therefore, they operate in a two-firm oligopoly. Each doctor can charge either a high price or a low price for a standard medical visit. Figure 4 shows the possible profits for Dr. Fine and Dr. Feelgood, based on each doctor's pricing strategy.

In an oligopoly, the ideal pricing strategy is for all firms to charge the high price. Due to the structure of oligopoly markets, charging the low price is considered cheating, when there is more than one pricing-period expected, because competitors are likely to be shut out of the market in the short run. Assume that Dr. Fine and Dr. Feelgood are the only two medical doctors offering immediate walk-in medical services in a small rural town. Therefore, they operate in a two-firm oligopoly. Each doctor can charge either a high price or a low price for a standard medical visit. Figure 4 shows the possible profits for Dr. Fine and Dr. Feelgood, based on each doctor's pricing strategy.

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

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 1E

See similar textbooks

Similar questions

Does each individual in a prisoners dilemma benefit more from cooperation or from pursuing self-interest? Explain briefly.
When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that the cartel could stay together over the long term-that the incentives for individual members. to cheat would become too strong. More than fort),r years later, OPEC still exists. Why do you think OPEC has been able to beat the odds and continue to collude? Hint: You may wish to consider non-economic reasons.
There are two firms in the market (duopoly). These two firms are competingsimultaneously. The first firm chooses its output level (x) by predicting the second firm’soutput (y). Let c denote the total cost function c(x) = x and c(y) = y. Also, let’s assumethat the inverse demand function is p(Y) = 7 - Y where Y = x + y. (1) Obtain the reactionfunction of the first firm. (2) Find the equilibrium (output and profit of each firm) whentwo firms simultaneously compete
Two firms with differentiated products are competing in price. Firm A and B face thefollowing demand curves: Q_A = 70 − 2P_A + P_B and Q_B = 120 − 2P_B + P_Arespectively. Assume production is costless.a. Give equations for and graph each firm’s reaction curve.b. If both firms set their prices at the same time, what is the Nash equilibriumprice, quantity, and profit for each firm?c. Suppose A sets its price first and then B responds. What price and quantitydoes each firm set now? Is it advantageous to move first?d. Compare the profits from part b and c. Which firm benefits more from thesequential price choosing? (Please do b-d, thanks :))
Think about firms such as the Coca Cola Company and PepsiCo who competeagainst each other in the monopolistically competitive market for soft drinks. Eachfirm produces a unique product, but each of these unique products is to some extenta substitute for the soft drinks produced by rival companies.Now imagine a situation where the firms within such a market are facing suchextreme competition that they are unable to make an operating profit. Characterisethis situation diagrammatically and explain what will happen to the market, payingparticular attention to the exit or entry of firms out of (or into) the market.
If firm 1 and firm 2 are the oligopolistic firms in bottled spring water production in Nomansland. The market demand is given by ? = 5000 −20?, Qd is the number of kilolitres demanded per month while P is the price of kilolitres of bottled water. The marginal cost of a kilolitre of bottled water is R10.How do I Find the Cournot equilibrium quantities and price? and how do I Find the Cournot profits and the monopolist profits?
Two firms dominate the market for surgical sutures and competeaggressively with respect to research and development. The followingpayoff table depicts the profit implications of their different R&Dstrategies.a. Suppose that no communication is possible between the firms; eachmust choose its R&D strategy independently of the other. Whatactions will the firms take, and what is the outcome?b. If the firms can communicate before setting their R&D strategies,what outcome will occur? Explain.Firm B’s R&D SpendingLow Medium HighLow 8, 11 6, 12 5, 14Firm A’s R&D Medium 12, 9 8, 10 6, 8 SpendingHigh 11, 6 10, 8 4, 6
Explain the kinked demand curve theory of an oligopoly. Include inyour answer a discussion of a contemprary oligopoly.