Question: Imagine that a two-firm duopoly dominates the market for spreadsheet application software for personal computers. Also assume that the firms face a linear market demand

Imagine that a two-firm duopoly dominates the market for spreadsheet application software for personal computers. Also assume that the firms face a linear market demand curve
P = $1,250 - Q
Where P is price and Q is total output in the market (in thousands) . Thus Q = QA + QB. For simplicity, also assume that both firms produce an identical product, have no fixed costs and marginal cost MCA = MCB = $50. In this circumstance, total revenue for Firm A is
TRA = $1,250QA - QA2 - QAQB
Marginal revenue for Firm A is
MRA = ∂TRA/∂QA = $1,250 - $2QA - QB
Similar total revenue and marginal revenue curves hold for Firm B.
A. Calculate the Stackelberg market equilibrium price-output solutions.
B. How do the Stackelberg equilibrium price-output solutions differ from those suggested by the Cournot model? Why?

Step by Step Solution

★★★★★

3.29 Rating (161 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

A To illustrate Stackelberg firstmover advantages reconsider the Cournot model but now assume that Firm A as a leading firm correctly anticipates the ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

411-B-E-M-E (4195).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

How do pricing objectives for a global firm differ from those used generally?

Do people who work for non-profit organizations differ from those who work at for-profit companies when it comes to personal job satisfaction? Separate random samples were collected by a polling...

How do ordering costs for items purchased externally differ from ordering costs for items manufactured internally within the firm?

Imagine that a two-firm duopoly dominates the market for spreadsheet application software for personal computers. Also assume that the firms face a linear market demand curve: P = $1250 - Q where P...

To illustrate the competitive process in markets dominated by few firms, assume that a two-firm duopoly dominates the market for high end semiconductor chips, and that the firms face a linear market...

Question 4 (20 points). A two-firm duopoly producing an identical product dominates the market, and that the firms face a linear market demand curve P=650-Q where Q is quantity of products, and P is...

P13.1Market Structure Concepts.Indicate whether each of the following statements is true or false and explain why. A. Equilibrium in monopolistically competitive markets requires that firms be...

P13.6 Cournot Equilibrium. VisiCalc, the first computer spreadsheet program, was released to the public in 1979. A year later, introduction of the DIF format made spreadsheets much more popular...

assume that a two-firm duopoly dominates the market for a product, and that the firms face a linear market demand curve Q2 Assume that a two-firm duopoly dominates the market for a product, and that...

A missile guidance system has five fail-safe components. The probability of each failing is 0.05. Find these probabilities. a. Exactly 2 will fail. b. More than 2 will fail. c. All will fail. d....

Write a paper about Brett who needed assistance in the cardiovascular health of senior citizens. In addition to analyzing the case, apply the MAPP process. Find two peer reviewed journal articles...

The fact that a firefighters job is more dangerous than a college professors job is an example of (A) compensating differential (B) a negative externality (C) the free-rider problem (D) the ability...

The simple interest on a certain sum of money at the rate of 5% p.a. for 8 years is ` 840. At what rate of interest the same amount of interest can be received on the same sum after 5 years? (a) 6%...

A government agency suspects that one of the firms it has hired under a cost-plus contract is padding its bills to the government. If padding is going on and if the agency can prove its case in...

On behalf of your company, you are preparing a price bid to supply a fixed quantity of a good to a potential buyer. You are aware that a number of competitors also are eager to obtain the contract....

A firm is looking for the best (i.e., lowest) price from one of two sellers. It can approach each seller only once (and at no cost). Seller Xs price is distributed uniformly between $30 and $40....

There are a number of accounting methods that can be used for asset and liability valuation. In some cases, fair value is appropriate; with others, historical cost is required. Please discuss the...

Is where the threaf passes after the thread guide

Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend,...