EBK MICROECONOMICS
2nd Edition
ISBN: 9780134458496
Author: List
Publisher: VST
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Question
Chapter 14, Problem 9P
(a)
To determine
Nash equilibrium given that differentiated products are sold.
(b)
To determine
Equilibrium when firms decide to collude and have the same price.
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Students have asked these similar questions
Problem 5.1. The inverse market demand for printer paper is given by P = 400 – 2Q. There are two firms
who compete to produce this paper, each with a marginal cost of production equal to c = 40 over a large
range of output (ie, assume constant marginal cost). The two firms compete in quantities, in other words
they each simultaneously choose a quantity to produce (Cournot competition).
Derive the Cournot-Nash equilibrium of this game. Please write final answers in the boxes, showing work in
blank areas.
(a) The reaction function for each firm.
91 (92):
92 (91)
(b) Optimal output q for each firm.
92
=
р
=
=
π1 =
(c) Market price (from demand curve).
(d) Firm profits.
92
=
π2 =
O Cell A
O Cell C
O Cell E
O Cell I
None of the above
Consider a market with two firms, Kellogg and Post, that sell breakfast cereals.
Both companies must choose whether to charge a high price ($4.00) or a low price
($2.50) for their cereals.
These price strategies, with corresponding profits, are depicted in the payoff matrix
to the right. Kellogg's profits are in red and Post's are in blue.
Kellogg
What is the cooperative equilibrium for this game?
Price = $4.00
Price = $2.50
O A. The cooperative equilibrium is for Kellogg to choose a price of $2.50 and
Post to choose a price of $4.00.
$800
Price = $4.00
$50
%3D
O B. The cooperative equilibrium is for Kellogg and Post to both choose a price
of $2.50.
Post
of $4.00.
OC. The cooperative equilibrium is for Kellogg and Post to both choose a price
$350
O D. The cooperative equilibrium is for Kellogg to choose a price of $4.00 and
$350
Price = $2.50
$50
Post to choose a price of $2.50.
O E. A cooperative equilibrium does not exist for this game.
Clear all
Chec
88,092
2
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