An oligopoly market consists of two firms who compete with each other for market share. Currently, each
Question:
An oligopoly market consists of two firms who compete with each other for market share. Currently, each firm has 50% share of the market and they each sell 1,500 units per day.
It is also known that the demand facing each producer depends on its volume of sales and also on the sales of its competitor. The following functions give the demand curves for each firm:
Firm A: P A = 240 - 4 Q A - 2 Q a
Firm B: P B = 210- 2 Q A - 4 Q a
In these equations, Q A and Q B represent the amount of sales by Firms A and B, expressed in hundreds of units. Neither of the firms have any fixed costs. Their marginal and average cost functions are given below:
Firm A:
MC A = 60+2 Q A for Q A > 2.5 (in hundreds of units)
AVC A = 60 + Q A
Firm B:
MC B = 50 + Q a for Q a > 3 (in hundreds of units)
AVC 8 = 50 + 0.5 Q a
Required:
Determine each firm's current price.
An Introduction to Management Science Quantitative Approaches to Decision Making
ISBN: 978-1111823610
14th edition
Authors: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran