EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 12, Problem 3RQ
To determine
To evaluate: The assumptions important for the Bertrand Paradox.
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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.
Consider a homogeneous good industry (such as an agricultural product) with just two firms and a total market demand Q = 400−P, so the inverse demand is P = 400 − Q. Suppose both firms have a constant marginal cost equal to $100 per unit of output and a fixed cost equal to $10,000. Suppose that the firms compete by simultaneously setting price, not simultaneously setting output. That is, suppose we consider the Bertrand model instead of the Cournot. Show that the two firms must earn lower profits.
Hint: Create a two-by-two game using two different prices for each firm. One price should be the Cournot price (the Cournot is price of the good when firms produce the Cournot output you found above, which is 100 and 100, so the price is P = 400 − 100 − 100 = 200). The second price should be under 200 and over 150. Then show that the Nash equilibrium of this game is the lower of the two prices. When calculating profits, assume that each firm has equal sales (one half of demand) if they charge…
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.
Chapter 12 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 12.2 - Prob. 1TTACh. 12.2 - Prob. 2TTACh. 12.2 - Prob. 1MQCh. 12.2 - Prob. 2MQCh. 12.2 - Prob. 1.1TTACh. 12.2 - Prob. 2.1TTACh. 12.2 - Prob. 1.1MQCh. 12.3 - Prob. 1MQCh. 12.3 - Prob. 2MQCh. 12.3 - Prob. 1TTA
Ch. 12.3 - Prob. 2TTACh. 12.3 - Prob. 1.1MQCh. 12.3 - Prob. 2.1MQCh. 12.3 - Prob. 1.1TTACh. 12.3 - Prob. 2.1TTACh. 12.4 - Prob. 1TTACh. 12.4 - Prob. 2TTACh. 12.5 - Prob. 1MQCh. 12.5 - Prob. 2MQCh. 12.5 - Prob. 1TTACh. 12.5 - Prob. 2TTACh. 12.6 - Prob. 1MQCh. 12.6 - Prob. 2MQCh. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQCh. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Prob. 12.3PCh. 12 - Prob. 12.4PCh. 12 - Prob. 12.5PCh. 12 - Prob. 12.6PCh. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Prob. 12.10P
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