Note that parts f) and g) do not depend on the other parts and could be completed before or after parts a) to e). Two different boutique wineries supply two towns: town A and town B. Winery 1 supplies town A and Winery 2 supplies town B. Both wineries have a constant marginal cost c = 20. Assume that consumers are indifferent between the wines from different wineries and that they purchase wine only in the town they live. Demand for wine in town A is given by pA=40−12qA; the demand for wine in town B is given by pB=70−qB. f) For parts f) & g) only, please assume that the total demand for wine (from both towns) is given by p = 125 - Q. Assume now that due to the new government regulation, the companies broke up and went back to operating as Wineries 1 and 2. Each winery can now supply both towns and still has a marginal cost of 20. If Wineries 1 and 2 decide how much wine to produce simultaneously, what is the equilibrium price, quantity sold and profit of each winery? g) For parts f) & g) only, please assume that the total demand for wine (from both towns) is given by p = 125 - Q. Assume that another winery, Winery 3, begins selling wine in towns A and B. While wineries 1 and 2 decide how much wine to produce simultaneously, winery 3 decides how much wine to produce after observing the choices of wineries 1 and 2. g1) What is the optimal output for Winery 3 to produce, if it knows that Wineries 1 and 2 produce outputs q1 and q2 respectively? g2) What is the optimal output for Winery 1 to produce, if it believes that Winery 2 will produce q2 and given the behaviour of Winery 3 determined above? g3) What is the equilibrium price and quantity sold by each winery?
Note that parts f) and g) do not depend on the other parts and could be completed before or after parts a) to e).
Two different boutique wineries supply two towns: town A and town B. Winery 1 supplies town A and Winery 2 supplies town B. Both wineries have a constant marginal cost c = 20.
Assume that consumers are indifferent between the wines from different wineries and that they purchase wine only in the town they live. Demand for wine in town A is given by pA=40−12qA; the demand for wine in town B is given by pB=70−qB.
f) For parts f) & g) only, please assume that the total demand for wine (from both towns) is given by p = 125 - Q.
Assume now that due to the new government regulation, the companies broke up and went back to operating as Wineries 1 and 2. Each winery can now supply both towns and still has a marginal cost of 20. If Wineries 1 and 2 decide how much wine to produce simultaneously, what is the
g) For parts f) & g) only, please assume that the total demand for wine (from both towns) is given by p = 125 - Q.
Assume that another winery, Winery 3, begins selling wine in towns A and B. While wineries 1 and 2 decide how much wine to produce simultaneously, winery 3 decides how much wine to produce after observing the choices of wineries 1 and 2.
g1) What is the optimal output for Winery 3 to produce, if it knows that Wineries 1 and 2 produce outputs q1 and q2 respectively?
g2) What is the optimal output for Winery 1 to produce, if it believes that Winery 2 will produce q2 and given the behaviour of Winery 3 determined above?
g3) What is the equilibrium price and quantity sold by each winery?
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