Consider a model of Cournot duopoly. Two firms produce an identical product. The inverse demand function...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider a model of Cournot duopoly. Two firms produce an identical product. The inverse demand function for the product is given by p= 60-y, where y = y₁ + y2 is the sum of the quantity produced by the two firms. Production costs are zero for both firms. a) Find the quantity produced by each firm in the Nash equilibrium of this game. Find the price of the product and the profit of each firm. b) Now say that marketing guru Jim has a proposal for firm 1. He would be able to convince people that the two firms' products were in fact slightly different from each other, so that the amount produced by each firm would not impact the price of the other's product as much as it did before. The inverse demand function for each product would become P₁ = 60-31-32 and p2 = 60-92-₁. What is the most that firm 1 would be willing to pay Jim to do this? Show your work and explain in a few sentences what you did to find your answer. Consider a model of Cournot duopoly. Two firms produce an identical product. The inverse demand function for the product is given by p= 60-y, where y = y₁ + y2 is the sum of the quantity produced by the two firms. Production costs are zero for both firms. a) Find the quantity produced by each firm in the Nash equilibrium of this game. Find the price of the product and the profit of each firm. b) Now say that marketing guru Jim has a proposal for firm 1. He would be able to convince people that the two firms' products were in fact slightly different from each other, so that the amount produced by each firm would not impact the price of the other's product as much as it did before. The inverse demand function for each product would become P₁ = 60-31-32 and p2 = 60-92-₁. What is the most that firm 1 would be willing to pay Jim to do this? Show your work and explain in a few sentences what you did to find your answer.
Expert Answer:
Related Book For
Microeconomics
ISBN: 9781464146978
1st Edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
Posted Date:
Students also viewed these economics questions
-
The demand function for a product is given by p = 3000e-q/3. (a) At what price per unit will the quantity demanded equal 6 units? (b) If the price is $149.40 per unit, how many units will be...
-
The demand function for a product is given by P = 200 / 2 + 0.1x Where x is the number of units and p is the price in dollars. (a) Graph this demand function for 0 ( x ( 250, with x on the horizontal...
-
The demand function for a product is given by p = 4000 ln (x =10), where p is the price per unit in dollars when x units are demanded. (a) Find the rate of change of price with respect to the number...
-
The adjusted trial balance for Windsor Company, Ltd. is presented in E4-8. WINDSOR COMPANY, LTD. Adjusted Trial Balance July 31, 2017 Instructions (a) Prepare an income statement and a retained...
-
Jim Shorts Company makes clothing for schools. Sales in 2013 were $4,820,000. Assets were as follows: Cash. $ 163,000 Accounts receivable. 889,000 Inventory.. 411,000 Net plant and equipment.....
-
Preparing and interpreting the statement of cash flows. Exhibit 15.14 presents a comparative balance sheet and Exhibit 15.15 presents a comparative income statement for Airlines Corporation for 2008...
-
Almetals, Inc., a Michigan company, entered into a contract with the German firm Wickeder Westfalenstahl regarding the purchase of clad metal, a specialty metal used in a variety of industries but...
-
Following are some of the tests of controls and substantive tests of transactions procedures often performed in the payroll and personnel cycle. (Each procedure is to be done on a sample basis.) 1....
-
To determine the kinetics (rates) of ozone depletion reactions, chemists perform controlled laboratory studies. In this simulated lab, we will interpret data obtained from such laboratory experiments...
-
Pender Corp. paid $234,000 for a 30% interest in Saltspring Limited on January 1, Year 6. During Year 6, Saltspring paid dividends of $100,000 and reported profit as follows: Profit before...
-
Atmospheric air at 300C dry bulb temperature and 75% RH enters a cooling coil at 200m3/min. The coil dew point temperature is 140C and its bypass factor is 0.1. Determine (1) the Temperature of air...
-
2 Find the inverse: f(x) = 3x+2
-
The Big Steel Box (BSB) produces industrial-grade shipping boxes for the local and international markets. Their factory is designed to produce at most 1400 boxes per week (with 40 working hours in a...
-
The new hospice in town has created a marketing campaign that has some great visual imagery to support building awareness of all the services the hospice offers to families of the critically ill in...
-
Explain the Deming chain reaction.Summarize the four components of Profound Knowledge. How do they mutually support each other?Why is it important to understand variation from a statistical...
-
A famous painting was sold in 1946 for $21,230. In 1960 the painting was sold for $31.4 million. What rate of interest compounded continuously did this investment sam As an investment, the painting...
-
FPJ Corp., a domestic corporation, engaged in the real estate business. It is the registered owner of a determinate land with improvements. XXX Corp., on the other hand, is a domestic corporation...
-
Use the T account for Cash below to record the portion of each of the following transactions, if any that affect cash. How do these transactions affect the companys liquidity? Jan. 2 Provided...
-
Owners of a movie theater have determined that the elasticity of demand for movie tickets equals -2.0 for students and -1.5 for adults. a. If the owners of the theater decide to segment the market,...
-
In Problem 1, we discovered that imperfect information about the quality of used cars caused fewer plums and more lemons to be offered for sale. Thinking in discrete steps, a. How does this revision...
-
Rockway & Daughters Piano Co. wishes to sell a piano to everyone. But some consumers are budgetconscious, and others are not, and unfortunately, Rockway cannot tell which is which. So, Rockway...
-
Depository institutions have been losing their advantage over other financial intermediaries in attracting customers funds. Why?
-
In the aftermath of the financial crisis of 20072009, there were calls to reinstate the separation of commercial and investment banking activities that was removed with the repeal of the...
-
The globalization of banking has led to the need for global benchmarks for interest rates. In light of the LIBOR scandal, what characteristic do you think is most central to any new interest rate...
Study smarter with the SolutionInn App