Which of one the following statements are correct about the Kreps and Scheinkerman (1983) model? It is a static model just like the Cournot model. 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. 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. It is a static model of price competition but the products of the firms are differentiated.

Which of one the following statements are correct about the Kreps and Scheinkerman (1983) model? It is a static model just like the Cournot model. 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. 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. It is a static model of price competition but the products of the firms are differentiated.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.12P

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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.
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.
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
Which one of the following statements is correct? A. The Bertrand model must be wrong because there exists a Nash equilibrium for the Cournot model. B. The Cournot model must be wrong because there exists a Nash equlibrium for the Bertrand model. C. The result which is referred to as the "Bertrand paradox" cannot be a Nash equilibrium outcome. D. The result which is referred to as the "Bertrand paradox" is nevertheless a Nash equilibrium outcome.
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 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…
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…
Which one of the following statements about the (modified) Stackleberg model is incorrect? A. Firm 1's move is a strategic move. B. Firm 2's move is a strategic move. C. It is can be solved by backward induction. D. It is a dynamic game.
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.
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.
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.

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		It is a static model just like the Cournot model.
		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.
		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.
		It is a static model of price competition but the products of the firms are differentiated.