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4. Suppose the market demand for a homogeneous product is given by Q = ozP, where oz and [3' are positive constants. The product is
4. Suppose the market demand for a homogeneous product is given by Q = ozP, where oz and [3' are positive constants. The product is supplied by a dominant rm with a constant marginal cost (3 > 0 and n competitive fringe rms, each of which has a cost function c,-(q,-) = q? / (2:19,) for '2', = 1, ..., n, where k,- > 0 is a parameter. Suppose the dominant rm moves rst to maximize its prots by setting a price P, followed by competitive fringe rms setting their quantities simultaneously to maximize their prots, reSpectively, taking the price as given. (a) Compute the equilibrium price and quantity level for each rm. (b) How does the presence of competitive fringe rms affect the equilibrium price, as compared to the monOpoly price by the dominant rm
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