HomeworkLib
Question

3. There are two firms that compete according to Cournot competition. Firm 1 has a cost function G(91) = 5.59+12. Firm 2 has
(e) Use your best response equations to mathematically solve for the equilibrium quantities qi 9, Q. equilibrium price p, a
() Now assume the two firms are colluding. Setup the joint profit maximization for the colluding firms (also known as the joi
(g) Solve the collusion profit maximization problem for equilibrium quantities qi.9.Q, equilib- rium price p, and profit fo
(h) Consider individual firm profits between parts e) and g). Will both these two firms agree to collude if they split the pr
business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

that compete according -32 There are two firms to Counnot competition. cost function of firm 1 firm 2 has a cost fuction Ouvufim a Equation (1) is the reaction fraction for Now Total revenue for firm 2 Pre=9600- _ (21+9)/2 = 6002 - ² 2 - 1 2 Now MargNow from (1) supstituting 91=45.99 wight 24q1th = 1200 -) 24(45.11) +22 - 12.00 -) 2 = 1200 - 1103.76 - 96:24 CD This Totul o27594 - 1057.54 – 2213.03) - (11644.94) profit for * The $ 12678.49 firm 2 = TR2 - The -5600(96-24) - £ (96.24845.42) --Ź(46:11- 960 -2 (21+4) (2pcs) - 5c12) 76.600 - 60041 - - - 12 60021+ 6009 - 11 21 - 4 21 21 - 22 - 2 22 - 5,597 + 12+2.522 +189. 6122, +92 = 600 ~- X6 qj +6222 60-ndi, x1 7291 +62 + 3600 21+ 6% = 600 7121 = 300 a = 42.25 4 +62 = 600 42.25 + 622=600 920 92Nou & Joint-Profits will be 772 600 (42.25) +600 (92.95) - + (42.25) -Ź (42.25X92195) - 192,95) - 5.5 (42.25) - 2.5(92,99 – 3pro wit equally at they split the each will get I = 49,475,318 2 $20.237.6529 b They will not agree to colleude it they split

0 0
Add a comment
Know the answer?
Add Answer to:
3. There are two firms that compete according to Cournot competition. Firm 1 has a cost...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 3. There are two firms that compete according to Cournot competition. Fim 1 has a cost func tion Cia1) 318. Firm 2 has a cost function C2()3. These firms cannot discriminate, so there is just one...

    3. There are two firms that compete according to Cournot competition. Fim 1 has a cost func tion Cia1) 318. Firm 2 has a cost function C2()3. These firms cannot discriminate, so there is just one price that is determined by the aggregate demand. The inverse demand equation is P Q) 300-0 Where total supply 0-2 (a) Setup the profit maximization problem for firm 1 with all necessary equations plugged in. (2 point) (b) Solve firm I's profit maximization peoblem...

  • 7. There are two firms that compete according to Cournot competition. Firm 1 has a cost...

    7. There are two firms that compete according to Cournot competition. Firm 1 has a cost function C1(91) = 2491 +5. Firm 2 has a cost function C(92) = 1022 +10. These firms cannot discriminate, so there is just one price that is determined by the aggregate demand. The inverse demand equation is P(Q) = 80 - Where total supply Q = 91 +92. (a) Setup the profit maximization problem for firm 1 with all necessary equations plugged in. (2...

  • 3. Suppose the two firms cannot collude and instead compete in the Cournot Model in the...

    3. 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)=Q2). a. Set up firm 1's profit maximization. b. Solve for firm 1's best response function. C. Solve for firm 1's quantity, firm 2's quantity, the equilibrium market quantity, and price. Show your work. d. Is this a Nash equilibrium? e. Do consumers prefer the Cournot...

  • 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...

  • 3. Suppose the two firms cannot collude and instead compete in the Cournot Model in the...

    3. 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)=Q2). e. Do consumers prefer the Cournot competition equilibrium over the collusion of the two firms in question 3? f. Do the two firms prefer Cournot competition over colluding (assuming the collusion agreement is to split joint profits equally)?

  • Suppose we have a market demand Q = 18 – P and a cost C(Q) 9)...

    Suppose we have a market demand Q = 18 – P and a cost C(Q) 9) = 3Q?. (10 points) 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) = -23. 2 a. Set up firm 1's profit maximization. b. Solve for firm 1's best response function. C. Solve for firm 1's quantity, firm 2's quantity,...

  • Suppose two firms cannot collude and compete in the Cournot Model. Market demand is Q =...

    Suppose two firms cannot collude and compete in the Cournot Model. Market demand is Q = 18 – P with the cost (c(Q) =*Q). a. Set up firm l's profit maximization. b. Solve for firm l's best response function. c. Solve for firm l's quantity, firm 2's quantity, the equilibrium market quantity, and price. Show your work. d. Is this a Nash equilibrium?

  • Mathematical Question 3 (30pts) 3. Consider two firms are performing Cournot price competition in two differentiated...

    Mathematical Question 3 (30pts) 3. Consider two firms are performing Cournot price competition in two differentiated goods markets. Firm 1 produces goods 1, and firm 2 produces goods 2, and two market demand functions are given by 91 (P1,P2) = 12-2p1 + P2 and 921,P2) = 12-2p2 + P 1. Furthermore, assume that the two firms have the same cost function such that fixed cost is $20 and variable cost is zero. a. (10pts) Calculate the equilibrium prices, quantities and...

  • only part e 7. There are two firms that compete according to Couro competition. Firm has...

    only part e 7. There are two firms that compete according to Couro competition. Firm has a cofection (n) = 241+5. Firm 2 has a cost function () = 10 + 10. These firms cannot discrimine, there is just one price that is determined by the aggregate demand. The inverse demand equations PQ) = 80- Where total supply + (a) Setup the profit maximisation problem for firm 1 h all commary equation plugged in 2 (6) Solve firm l's profit...

  • Problem 1. Cournot Competition with Two Firms Suppose there are two identical firms engaged in quantity competition (Co...

    Problem 1. Cournot Competition with Two Firms Suppose there are two identical firms engaged in quantity competition (Cournot competition). The demand is P=1-Q where Q =91 +92. Assume that firm's i total cost of production is TC(qi) Compute the Cournot equilibrium (i.e., quantities, price, and profits).

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT