Jim and TJ are Cournot duopolists. They each make an identical product. They will simultaneously choose a quantity of output, y and yr respectively. The market for this product has an inverse demand curve p = of output produced by both Jim and TJ. Their production costs are identical: production costs for each person i are c(yi) = 3y;. 15 – y, where y = yJ+ YT is the total quantity Say that both people are profit-motivated. Derive reaction functions for each person (their optimal choice given the choice made by the other person). Thus find the quantity produced by each person and the price in the Nash equilibrium of this game. Now say that Jim is not profit-motivated, but spite-motivated. He has one goal: to ensure that TJ cannot make positive profit, no matter what yr he picks. At least how much output YJ will Jim choose to produce? Explain the economic intuition behind your answer.

Jim and TJ are Cournot duopolists. They each make an identical product. They will simultaneously choose a quantity of output, y and yr respectively. The market for this product has an inverse demand curve p = of output produced by both Jim and TJ. Their production costs are identical: production costs for each person i are c(yi) = 3y;. 15 – y, where y = yJ+ YT is the total quantity Say that both people are profit-motivated. Derive reaction functions for each person (their optimal choice given the choice made by the other person). Thus find the quantity produced by each person and the price in the Nash equilibrium of this game. Now say that Jim is not profit-motivated, but spite-motivated. He has one goal: to ensure that TJ cannot make positive profit, no matter what yr he picks. At least how much output YJ will Jim choose to produce? Explain the economic intuition behind your answer.

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 2E

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