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These questions don't make any sense to me and I have gotten completely lost on how to solve for these. Could anyone help? Consider 2
These questions don't make any sense to me and I have gotten completely lost on how to solve for these. Could anyone help?
Consider 2 airplane manufacturers that compete as Cournot duopolists in the market for commercial aircraft. Arrowing (firm A) has a cost function given by c(q,) = %qA, whereas SkyTrain (firm S) has a cost function given by c(qg) = %qsz. The market demand function for commercial airliners is given by: Q =240-3P where Q) is the sum of the quantity of planes available for purchase. If we were to solve each firm's profit-maximization problem, treating the other firm's output level as fixed, we would find the following best response (BR) functions: 1 BR,(qs) =q, =119 39s 1 BRs(qs) = qs =80 394 a) If the two companies choose the quantities of trips supplied simultaneously, find the Cournot equilibrium quantities supplied for each firm and the equilibrium price. What are each firm's profits earned? b) Suppose that firm A has the opportunity to choose their quantity of trips first, so that they are a Stackelberg leader. Find the Nash Equilibrium to this game and calculate the profits that each firm would receive. c) Compare profits from part (a) and part (b). Would firm A benefit from moving first? Does firm B benefit from moving last? 4. Answer the following, assuming the firms in Question 2 above compete as Bertrand duopolists. a) What would you expect to be the price that would prevail in this market? Who will produce how much for the market? Explain intuitivelyStep by Step Solution
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