Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following duopoly industry. Demand is given by = , where is price, and = 1 + 2 is market quantity. represents the amount

Consider the following duopoly industry. Demand is given by = , where is price, and = 1 + 2 is market quantity. represents the amount produced by firm . The two firms have the same marginal cost equal to . Assume is large enough and there is no fixed cost. (50 points)

(1) In a Cournot model (two firms decide their output levels simultaneously and independently), solve each firm's output quantity and profit, market price, and market quantity. (2) Now suppose two firms collude to decide their output levels together and split the market demand equally. Solve each firm's output quantity and profit, market price, and market quantity.

(3) Now suppose two firms move sequentially and firm 1 is the leader (Stackelberg model). Solve each firm's output quantity and profit, market price, and market quantity.

(4) Put your results from the previous three sub-questions in the following table. 1 2 1 2 Cournot Model Collusion Stackelberg Model

(5) Compare your results and explain. (Cournot vs. Collusion and Cournot vs. Stackelberg)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Bank Management

Authors: Timothy W Koch, Mark S Cracolice

7th Edition

1111804265, 9781111804268

More Books

Students also viewed these Economics questions

Question

what is an question to ask when analyzing external threats

Answered: 1 week ago

Question

Do not go, wait until I come

Answered: 1 week ago

Question

Pay him, do not wait until I sign

Answered: 1 week ago