Suppose we have 2 firms competing in a Cournot manner with fixed costs. One equilibrium of...
Suppose we have 2 firms competing in a Cournot manner with fixed
costs.
One equilibrium of this game is only 1 firm producing. What
quantity will they produce and why is it an equilibrium?
Homework Answers
ANSWER:
GIVEN THAT:
WE HAVE 2 FIRMS COMPETING IN A FIXED COSTS AND EQUILIBRIUM:
1.Cournet Competition is a model in which two models are competing with each other and they themselves choose to produce their own quantity independently but it only applies when identical products are produced by the firms.
2. It was given by Augustin Cournet.Cournet Competition is also known as Nash Equilibrium.
3. If there is only one firm producing, then the firm might have the monopoly power and they can set the price on their own .
4. They will produce only that level of quantities of products,where Marginal revenue equals to Marginal cost.
5.Monopoly market achieves the equilibrium level when the level of output produced in the condition where MR=MC.
Add Answer to:
Suppose we have 2 firms competing in a Cournot manner with fixed
costs.
One equilibrium of...
Suppose there are two firms, 1 and 2, competing in quantity. The market demand is p...
Suppose there are two firms, 1 and 2, competing in quantity. The market demand is p = 15-(q1 +q2), where q1 and q2 are the quantities produced by rms 1 and 2. Both rms have constant marginal cost c1 = c2 = 3. (a) [10] Find the Cournot equilibrium of this market. Compute the consumer surplus in equilibrium. b) Now suppose firms 1 and 2 merge, so that they become a monopolist with demand function p = 15 ? q,...
7. Consider an asymmetric Cournot duopoly game, where the two firms have different costs of production....
7. Consider an asymmetric Cournot duopoly game, where the two firms have different costs of production. Firm 1 selects quantity qı at a pro- duction cost of 291. Firm 2 selects quantity 92 and pays the produc- tion cost 492. The market price is given by p = 12 – 91 - 92. Thus, the payoff functions are u(91,92) = (12 – 91 - 92.91 – 291 and uz(9192) = (12 – 91 - 92)92 – 492. Calculate the firms'...
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition....
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition. The demand is P = 2 - Q where Q =q1+q2. Assume ci = 1 and c2 = , i.e., Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits).
Suppose two firms (Firm 1 and Firm 2) are engaged in Cournot competition. Both firms are...
Suppose two firms (Firm 1 and Firm 2) are engaged in Cournot competition. Both firms are currently producing the Nash equilibrium quantities. If firm 1 were to unilaterally reduce their production by one unit, what would happen to firm 1's profit? Firm 1's profit would decrease Firm 1's profit would increase Firm 1's profit would stay the same There is not enough information to answer this question
Problem 4. Cournot Competition With Different Costs Suppose there are two firms engaged in quantity cornpetition....
Problem 4. Cournot Competition With Different Costs Suppose there are two firms engaged in quantity cornpetition. The demand is P = 2-Q where Q qi + 92. Assunie c.-1 and c2 =丨, ie.. Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits)
8. Suppose two long-lived firms are engaged on repeated Cournot competition. The firms have a common...
8. Suppose two long-lived firms are engaged on repeated Cournot competition. The firms have a common discount factor 8. Each period, firms choose simultaneously how much to produce. Suppose that each firm can only choose between a high output (H), or a low output (L). The stage game payoffs are as follows. HL H 4,4 1,6 L 6,1 2,2 (a) Which actions are dominated in the stage game? (b) Which outcomes are Pareto dominated in the stage game? (c) Find...
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition....
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition. The demand is P = 2 - Q where Q=q1 +22. Assume cı = { and c2 = , i.e., Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits). price, and profits).
Consider a duopoly Cournot game, where Firm 1 and Firm 2 have the same marginal cost...
Consider a duopoly Cournot game, where Firm 1 and Firm 2 have the same marginal cost of production c = 3. The total quantity produced by the firms is Q. The demand function is p(Q) = 84 − Q. a.) Write down Firm 1’s profit function. b.) * Calculate Firm 1’s best-response function. c.) * Find the pure-strategy Cournot-Nash equilibrium of this game. d.) * Show that the firms make strictly positive profit in equilibrium. e.) Explain intuitively why the...
Suppose we have two firms with the same cost C(q) = {Q2 in a market which...
Suppose we have two firms with the same cost C(q) = {Q2 in a market which demand is Q 18 – P, the two firms compete in the Cournot Model. a. Set up firm 1's profit maximization and best response function. b. Solve for firm 1's quantity, firm 2's quantity, the equilibrium market quantity, and price. Please show your work. c. Is this a Nash equilibrium?
Suppose the two firms cannot collude and instead compete in the Cournot Model in the market...
Suppose the two firms cannot collude and instead compete in the Cournot Model in the market described in question 1 (market demand is still Q=18-P) with the same cost (C(Q)=1/2 *Q^2). Set up firm 1’s profit maximization. Solve for firm 1’s best response function. Solve for firm 1’s quantity, firm 2’s quantity, the equilibrium market quantity, and price. Show your work. Is this a Nash equilibrium? Do consumers prefer the Cournot competition equilibrium over the collusion of the two firms...
7. Consider an asymmetric Cournot duopoly game, where the two firms have different costs of production. Firm 1 selects quantity qı at a pro- duction cost of 291. Firm 2 selects quantity 92 and pays the produc- tion cost 492. The market price is given by p = 12 – 91 - 92. Thus, the payoff functions are u(91,92) = (12 – 91 - 92.91 – 291 and uz(9192) = (12 – 91 - 92)92 – 492. Calculate the firms'...
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition. The demand is P = 2 - Q where Q =q1+q2. Assume ci = 1 and c2 = , i.e., Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits).
Suppose two firms (Firm 1 and Firm 2) are engaged in Cournot competition. Both firms are currently producing the Nash equilibrium quantities. If firm 1 were to unilaterally reduce their production by one unit, what would happen to firm 1's profit? Firm 1's profit would decrease Firm 1's profit would increase Firm 1's profit would stay the same There is not enough information to answer this question
Problem 4. Cournot Competition With Different Costs Suppose there are two firms engaged in quantity cornpetition. The demand is P = 2-Q where Q qi + 92. Assunie c.-1 and c2 =丨, ie.. Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits)
8. Suppose two long-lived firms are engaged on repeated Cournot competition. The firms have a common discount factor 8. Each period, firms choose simultaneously how much to produce. Suppose that each firm can only choose between a high output (H), or a low output (L). The stage game payoffs are as follows. HL H 4,4 1,6 L 6,1 2,2 (a) Which actions are dominated in the stage game? (b) Which outcomes are Pareto dominated in the stage game? (c) Find...
Problem 3. Cournot Competition with Different Costs Suppose there are two firms engaged in quantity competition. The demand is P = 2 - Q where Q=q1 +22. Assume cı = { and c2 = , i.e., Firm 2 is more efficient. Compute the Cournot equilibrium (i.e., quantities, price, and profits). price, and profits).
Suppose we have two firms with the same cost C(q) = {Q2 in a market which demand is Q 18 – P, the two firms compete in the Cournot Model. a. Set up firm 1's profit maximization and best response function. b. Solve for firm 1's quantity, firm 2's quantity, the equilibrium market quantity, and price. Please show your work. c. Is this a Nash equilibrium?
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 11 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 11 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 11 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 11 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 11 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 11 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 11 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 11 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 11 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 11 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 11 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 11 months ago