MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Question
Chapter 13, Problem 5CACQ
a.
To determine
To explain: The two examples of activities that might raise rivals marginal costs.
b.
To determine
To explain: Whether it is necessary for the manager of firm 1 to enjoy hurting the rival.
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Students have asked these similar questions
Consider an industry with two identical firms (denoted firm 1 and 2) producing a homogenous good. Firms compete in quantities. Firm 1 has a
constant marginal cost of 20. Firm 2 has a constant marginal cost of 80.
Demand in the industry is given by
D(p) = 380 - p.
Let q1
and
92
denote the quantities of firm 1 and 2, respectively.
Derive the Nash equilibrium in quantities. What is the total production in this industry?
Two firms, A and B, sell the same good X in a
market with total demand Q = 100 – P. The
two firms compete on quantities and decides
how much to produce simultaneously. Firm A
cost function is C(qA) = 40qA. Firm B cost
function is C(qB) = 60qB.
1. Find the best reply functions of both firms
and represent them in a graph.
2. Find the quantity produced by each firm in
a Nash equilibrium.
3. Find the firms and consumers surplus.
4. Compare the surplus of firms found above
with the surplus arising when both firm
cooperate to sustain a monopoly outcome.
5. Assume now that A and B compete as in a
Stackelberg model. A chooses first and B
chooses after observing the choice of A. Find
equilibrium quantities produced by each firm
and the market equilibrium price.
Consider a market for crude oil production. There are two firms in the market. The marginal cost of firm 1 is 20, while that of firm 2 is 20. The marginal cost is assumed to be constant. The inverse demand for crude oil is P(Q)=200-Q, where Q is the total production in the market. These two firms are engaging in Cournot competition. Find the production quantity of firm 1 in Nash equilibrium. If necessary, round off two decimal places and answer up to one decimal place.
Chapter 13 Solutions
MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
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