There are 2 firms in the 3D printer market. The demand curve for 3D printers is Q=400-4P,
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Question:
There are 2 firms in the 3D printer market. The demand curve for 3D printers is Q=400-4P, where Q is the total market demand. Each firm i’s cost is 10qi, where qi is the quantity for firm i.
- If firms conduct Cournot competition, what would be the price, total output, and profit per firm?
- If the two firms collude, what would be the price, total output, and profit per firm assuming they do not engage in price discrimination?
- Suppose the colluding firms are producing equal quantities, and one firm decides to produce more (i.e. cheat). If the firm 1 assumes that firm 2 will continue to produce the collusive quantity, how much should firm 1 produce? What will the profit per firm? (Note, the profits here do have decimal points.)
- Use the profits that you computed to fill in the payoffs in this game.
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