3. There are three identical firms in the market research industry. The demand is 1- Q, where Q = q1 + q2 + q3. The marginal cost is zero. a. Compute the Cournot equilibrium b. Show that if two of the three firms merge (transforming the industry into a duopoly), the profit of these firms decreases. Explain why and use a table to show the changes. C. Show the result on profits if all three firms were to merge

3. There are three identical firms in the market research industry. The demand is 1- Q, where Q = q1 + q2 + q3. The marginal cost is zero. a. Compute the Cournot equilibrium b. Show that if two of the three firms merge (transforming the industry into a duopoly), the profit of these firms decreases. Explain why and use a table to show the changes. C. Show the result on profits if all three firms were to merge

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 11P

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which of the following statements about industries that are oligopolies is false? Select one a. An oligopoly with two firms is calleda duopaly, b. Firms in these industries may attempt to cooperate. C The fact that there is more than one firm in an oligopoly means that there are no barrien to entry d. Firms in these industries are interdependent
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5. Duopolist firms 1 and 2 compete on price with some market differentiation. Demand for firm ie{1, 2} is q, = 2 – 2p, + p, Neither firm has costs. a. Find the best response functions for each firm in the static game. b. Find the unique Nash equilibrium prices in the static game. c. Are prices strategic complements or strategic substitutes? Briefly explain. d. Does Firm 1 want Firm 2 to increase or decrease p,?
Two firms with differentiated products are competing in price. Firm A and B face thefollowing demand curves: Q_A = 70 − 2P_A + P_B and Q_B = 120 − 2P_B + P_Arespectively. Assume production is costless.a. Give equations for and graph each firm’s reaction curve.b. If both firms set their prices at the same time, what is the Nash equilibriumprice, quantity, and profit for each firm?c. Suppose A sets its price first and then B responds. What price and quantitydoes each firm set now? Is it advantageous to move first?d. Compare the profits from part b and c. Which firm benefits more from thesequential price choosing? (Please do b-d, thanks :))
For each statement in the left column find and match convenient part from the right column of the table: Write your answer A. The market, represented by a group of sellers, unified by an agreement on its segmentation and final price of the production, is considered as ... 1. ... for the oligopoly B. The situation in which society undergoes losses due to high prices and low output is more typical for ... 2 ... for the price discrimination C. The market in which several sellers can affect and control the price of products in an industry is typical for ... 3. ... for the price competition D. The situation when a different price is given for the same product is typical for ... 4. ... for the market of imperfect competition E. Limited resources is the main factor determining the situation typical for ... 5. ... for the perfect competition F. The absence of the supply curve is typical for... 6. ... for the cartel…
1. Two firms produce identical products at zero cost, and they compete by setting prices. If each firm charges a low price, the both firms earn profits of zero. If each firm charges a high price, then each firm earns profits of $30. if one firm charges a high price and the other firm charges a low price, the firm that charges the lowest price earns profits of $50 and the firm charging the highest price earns profits of zero. a. Write this game in normal form. b. Suppose the game is infinitely repeated. Can the players sustain the "collusive outcome" as a Nash equilibrium if the interest rate if 50 percent?