The main difference between the Cournot model and the Bertrand model is that: The Bertrand model assumes that firms have the ability to collude The Bertrand model assumes that firms only control their own price The Bertrand model assumes that consumers have perfect information The Bertrand model assumes that firms are price setters not quantity setters None of the above

The main difference between the Cournot model and the Bertrand model is that: The Bertrand model assumes that firms have the ability to collude The Bertrand model assumes that firms only control their own price The Bertrand model assumes that consumers have perfect information The Bertrand model assumes that firms are price setters not quantity setters None of the above

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.9P

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Which of one the following statements are correct about the Kreps and Scheinkerman (1983) model? A It is a 2-stage dynamic model in which the firms decide on quantities in stage 1 and make pricing decisons with identical constant marginal cost in stage 2. B It is a static model just like the Cournot model. C It is a static model of price competition but the products of the firms are differentiated. D It is a 2-stage dynamic model in which the firms decide on capacities in stage 1 and make pricing decisions with capacity constants in stage 2.
Under the kinked demand curve model, an increase in marginal cost will lead to: A. An increase in output level and an increase in price. B. Neither a change in output level nor a change in price. C. A decrease in output level and no change in price. D. A decrease in output level and an increase in price. E. An increase in output level and a decrease in price.
Consider the following Stackelberg model. There are two firms in the market. Firm 1 is the leader and firm 2 is the follower. Firms can decide to produce low or high. The extensive-form representation below presents the profits depending on production decisions of firms. The first value is profit of firm 1 and second value is profit of firm 2 depending on their production decisions. Solve using backward-induction. What are the optimal production levels of both firms? Describe how you found the optimal strategy using words.see the image
Describe the Cournot and the Bertrand models. Discuss the main critics to both models.
Assume that Starbucks and Gloria Jeans are offering coffees with slightly different taste and acidity.a) What kind of product differentiation are these firms using? Describe briefly using words. b) Consider the location (Hotelling) model. Analyze the behavior of consumers using the Hotelling model graph. Describe the graph using words. Describe how consumers choose between Starbucks and Gloria Jeans in the Hotelling model using words.
Which of one the following statements is correct? A. The Cournot model is simply wrong because in the real world firms do make pricing decisions. B. Only the Bertrand model can be right because in the real world firms do make pricing decisions. C. The Cournot model can be justified as a reduced form of a dynamic game in which firms make decisions on quantities, which are followed by pricing decisions. D. The Cournot model are justified because in all real world markets there are auctioneers who play the function of clearing the markets.
This pertains to the Cournot model except that a. Both firms maximize profit b. Each firm anticipates the price movement of the other c. There are only 2 firms in the industry d. Each firm takes the output as given
You are a medical group manager. Some market research has suggested that the price elasticity of demand for the services of your physicians is −4.1. The marginal cost for the average unit of physician service in your group is approximately $536. A. Using the economic pricing model formula, calculate your profit-maximizing price for each unit of physician services. B. Suppose that your medical group is considering new contracts with two particular businesses to provide physician services to their employees. If the marginal cost for each service unit is the same as with the rest of your customers, but the price elasticity of demand from the first new business customers is −0.9, and the second group of business customers is −4.4, how would that change your profit-maximizing price for each of the new groups? Would you recommend that your medical group obtain contracts with both new groups, just one of them or none? Explain your reasoning. C. In order to maximize your profits, what specific…
Consider a market with four firms. Firms A and B have a marginal cost of $7. Firm C has a marginal cost of $11. Firm D has a marginal cost of $5. What occurs if the firms compete in the Bertrand model? Group of answer choices None of the other answers are correct. Firm D will capture the entire market with a price of $6.99. All four firms will each have one quarter of the market with a price of $11. Firms A and B will each have half the market with a price of $7.00. Firm D will capture the entire market with a price of $5.00.
Consider the following Cournot model. The inverse demand function is given by p = 30 –Q, where Q = q1 + q2. Firm 1’s marginal cost is $6 (c1 = 6). Firm 2 uses a new technology so that its marginal cost is $3 (c2 = 3). There is no fixed cost. The two firms choose their quantities simultaneously and compete only once. (So it’s a one-shot simultaneous game.) Answer the following questions. (4points)DeriveFirm1andFirm2’sreactionfunctions, respectively. (2 points) Solve the Nash equilibrium (q1N, q2N). (2points)Whatistheequilibriumpriceandwhatistheprofitlevel for each firm? (3 points) Suppose there is a market for the technology used by Firm 2. What is the highest price that Firm 1 is willing to pay for this new technology? (3points)Nowlet’schangethesetupfromCournotcompetitionto Bertrand competition, while maintaining all other assumptions. What is the equilibrium price? (3 points) Suppose the two firms engage in Bertrand competition. What is the highest price that…
Which of the following statements is correct? a. In the Stackelberg model, the first mover’s ability to commit may afford it a big strategic advantage. b. In incomplete information games, another possible first-mover strategic advantage is the ability to signal. c. The incomplete-information model of entry deterrence has been used to explain why a rational firm might want to engage in predatory pricing. d. All of the above.
Consider the Tourist-Trap model. Which of the following statements is true? In the Tourist-Trap model, fewer firms can lead to lower prices, but in the complete information model, fewer firms will lead to higher prices. Consumers only buy from the lowest price firm in the Tourist-Trap model. Firms charging Marginal Cost is a long run equilibrium in the Tourist-Trap model. More than one of the other statements are true.