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Gibson and Fender produce electric guitars. Suppose that there are no other significant firms in this industry, so that Gibson and Fender constitute an oligopoly.
Gibson and Fender produce electric guitars. Suppose that there are no other significant firms in this industry, so that Gibson and Fender constitute an oligopoly. Each guitar costs $500 to produce. Industrywide guitar prices depend on industrywide output according to the market demand curve shown below. Assume that profits are divided in proportion to the firms' output. Thus, if one firm produces 100 guitars while the other produces 75 guitars (a ratio of 4 to 3 ), then the profit is divided in the same ratio (e.g., profits are \$2100 when 175 are produced requiring $1200 goes to one firm and $900 to the other). Assume that profits are divided in proportion to the firms' output. Thus, if one firm produces 100 guitars while the other produces 75 guitars (a ratio of 4 to 3), then the profit is divided in the same ratio (e.g., profits are $2100 when 175 are produced requiring $1200 goes to one firm and $900 to the other). a. The marginal and average costs of production are $ (xxx). b. Create the 33 payoff matrix assuming each company may produce 50,75 or 100 guitars per day to answer the following questions and it email to me. c. Gibson (does/does not) have a dominant strategy and Fender (does/does not) have a dominant strategy? d. The Nash equilibrium for Fender/Gibson has production at (a. 50/50, b. 75/75, c. 100/100, d. 50/75, e. 75/50,f.50/100,9.100/50, h. 75/100,1.100/75 ) and profits of $ (xxxx). e. If the firms could (successfully) collude to maximize their profits, the industry output would be (xxx) and industry profits would be $ (xxxx)
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