Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 15, Problem 15.12P
a
To determine
To find:
The Nash equilibrium.
b)
To determine
To find:
Nash equilibrium of firm 1 and 2.
c)
To determine
To find:
Bayesian Nash equilibrium.
d)
To determine
To find:
Type of firm’s which gain from incomplete information and complete information and whether firm 2 earn more profit on an average.
e)
To determine
To find:
Seperating equilibrium and whether thr loss to the low type from trying to pool in the first period exceeds the second period gain from having convinced firm 2 that it is the high type.
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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.)
d. 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?
e. Now let’s change the setup from Cournot competition to Bertrand competition, while maintaining all other assumptions. What is the equilibrium price?
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Assuming there are two companies selling personal computers,Company Jackfruit Computers and Company Mangoes Computer. They both have an inventory of personal computers that they would like to sell before a new generation of faster, cheaper machines is introduced. The question facing each competitor is whether or not they should widely advertise a “close out” sale on these discontinued items, or instead let excess inventory work itself off over the next few months. The net revenue to each firm in millions of $, is depicted in the payoff matrixbelow:
Mangoes
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1. Determine the dominant strategy for each firm
2. Would collusion work in this case? Explain.
OLIGOPOLY 1.- Each of two firms, firms 1 and 2, has a cost function C(q) = 30q; the inverse demand function for the firms' output is p = 120-Q, where Q is the total output. Firms simultaneously choose their output and the market price is that at which demand exactly absorbs the total output (Cournot model).(a) Obtain the reaction function of a firm.(b) Map the function obtained in (a), and graphically represent the Cournot equilibrium in this market.(c) Repeat (b), this time analytically.(d) Now suppose that firm 1's cost function is C(q) = 45q instead, but firm 2's cost is unchanged. Analyze the new solution in the market.(e) Obtain the total surplus, consumer surplus, and industry profits in both cases, and compare. What is the effect of the worsening in firm 1's cost?
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