Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184890
Author: PINDYCK
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 5RQ
To determine
The advantage of the output setting firm under stackelberg model.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Explain, using graphs, how the equilibrium in an industry in the Krugman's model changes when the size of the market increases (perhaps by economic integration).
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
In a Cournot model, firms Go and Stop compete by producing good X. Demand is X = 50 - 0.5P, where P is price. The two firms have zero cost. If firm Go believes that firm Stop will produce 20 units, then firm Go's optimal reaction is produce _____ units
Please do it fast ASAP .... Fast
Chapter 12 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
Knowledge Booster
Similar questions
- 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.arrow_forwardIn the Bertrand model, suppose that each firm has a marginal cost of £5 and that firm 1 sets a price of £5, which of the following a best-response for firm 2? Click all the correct answers. £5.00 £4.98 £4.99 £5.20 £5.01arrow_forwardConsider a "Betrand price competition model" between two profit maximizing widget producers say A and B. The marginal cost of producing a widget is 4 for each producer. Each widget producer has a capacity constraint to produce only 5 widgets. There are 8 identical individuals who demand 1 widget only, and individuals value each widget at 6. If the firms are maximizing profits, then which of the following statement is true: a) Firm A and Firm B will charge 4 b) Firm A and Firm B will charge 6 c) Firm A and Firm B will charge greater than or equal to 5 d) None of the options are correct. Explain clearly.arrow_forward
- Assume the market for a product can be described as a Cournot duopoly with two identical firms. The Nash-equilibrium in this market is that the two firms produce the same quantity. Hence, they will have identical market shares, each will have 50%. Assume that firm 1 decides to invest in a technology that reduces its marginal costs. a) What will happen to the two firms market shares? You must explain how you find the answer. b) What will happen to total production and the price of the product? Again, explain your answer.arrow_forwardNash equilibrium can be defined as the competitive outcome where _____A. all firms set prices equal to average cost and all firms make economic profit.B. each firm sets a price equal to marginal cost and each firm makeseconomic profit.C. each firm sets a price higher than marginal cost and each firm makeseconomic profit.D. each firm sets a price lower than marginal cost and each firm makeseconomic profit.E. firms set a price lower than average cost and all firms make economic profit.arrow_forwardThis is a Microeconomics problem. Two firms A and B operating in the same market must choose between a collude price and a cheat price. Answer the following questions in order. (a) Does Firm A have a dominant strategy? Explain your answer. (b) Does Firm B have a dominant strategy? Explain your answer. (c) Is there an equilibrium solution to the above game? (d) Is this equilibrium solution to the game the most "ideal" outcome for the players? Explain clearly why or why not.arrow_forward
- In the Cournot model, each firmʹs ________ shows the firmʹs optimal, profit-maximizing output as it depends on its rivalʹs output. a ) price leadership decision b ) dominant strategy c ) reaction d ) collusive responsearrow_forwardWhy oligopoly firm earns abnormal profit in the long run, while a competitive firm earns normal profit only?arrow_forwardThe demand for a product is Q = a - P/2. If there are 4 firms in an industry and marginal cost is MC = 20, then the price in Nash equilibrium is P = 56. What is a?arrow_forward
- Consider a market organized along a 1 mile stretch of road (from D=0 to D=1). Consumers along the stretch of road are uniformly distributed. There are two firms, with Firm 1 located at mile marker .5 and Firm 2 located at mile marker 1.0 and they compete on prices. Customers choose which store to shop at according to P + cD, where c=2 and D is the distance to the store. What is the Nash Equilibrium?arrow_forward. What is the Nash equilibrium in this advertising war?a) Coke advertises; Pepsi does not advertise b) Pepsi advertises; Coke does not advertise c) neither of them advertises d) both of them advertise Explain the reasons for your answer? Was any other equilibrium position possible? advertise do not advertise pepsi-advertise coke profit=$50B coke profit =$20B PEPSI profit =$50B pepsi profit =$100B do not advertise coke profit =$100B coke profit =$80B pepsi profit =$20B PEPSI PROFIT =$80 Barrow_forwardTwo firms commercialize two products that they both compete for. Each firm currently has 50 % of the market share. As the two products have been recently improved, both firms are planning to launch an advertising campaign. If neither firm advertises, their market share remains the same. If one of them launches a more powerful advertising campaign, the other loses a proportional percentage of its customers. Market research indicates that it is feasible to reach 50 % of potential customers by TV, 30 % through the press and 20 % on the radio. a. Develop the payoff matrix b. Indicate the most appropriate advertising strategy for both firms c. Determine the game valuearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning