Samsung and LG produce Liquid Crystal Display (LCD) panels for television sets. Suppose (for now) the...

 

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Samsung and LG produce Liquid Crystal Display (LCD) panels for television sets. Suppose (for now) the panels they produce are identical and Samsung and LG compete in the quantities of display panels they produce. Samsung can produce a panel for a marginal cost of $50 per unit and LG can produce a panel for a marginal cost of $80 per unit. Demand for LCD panels is given by the following inverse demand function P-500-0.010. a) If the two firms must produce their quantities simultaneously, what is the Cournot-Nash equilibrium in this market? In other words, what quantity does each firm produce, and what is the market price? What is each firm's profit? b) Suppose instead that Samsung chooses its quantity first followed by LG. What is the Stackelberg equilibrium in this market? In other words, what quantity does each firm produce, and what is the market price? What is each firm's profit? c) Suppose instead Samsung chooses its price first, followed by LG. What are the equilibrium price and quantities for each firm in the sequential game? d) What are some of the basic problems associated with output restriction schemes? Samsung and LG produce Liquid Crystal Display (LCD) panels for television sets. Suppose (for now) the panels they produce are identical and Samsung and LG compete in the quantities of display panels they produce. Samsung can produce a panel for a marginal cost of $50 per unit and LG can produce a panel for a marginal cost of $80 per unit. Demand for LCD panels is given by the following inverse demand function P-500-0.010. a) If the two firms must produce their quantities simultaneously, what is the Cournot-Nash equilibrium in this market? In other words, what quantity does each firm produce, and what is the market price? What is each firm's profit? b) Suppose instead that Samsung chooses its quantity first followed by LG. What is the Stackelberg equilibrium in this market? In other words, what quantity does each firm produce, and what is the market price? What is each firm's profit? c) Suppose instead Samsung chooses its price first, followed by LG. What are the equilibrium price and quantities for each firm in the sequential game? d) What are some of the basic problems associated with output restriction schemes?

Answer rating: 100% (QA)

C Since Samsung chooses its price first it is actually following the Bertrand Model of Duopoly It ha... View the full answer