Consider a homogeneous product industry with three firms 1, 2, and 3 that engage in simultaneous quantitycompetition. All firms incur identical constant marginal cost c and no fixed cost. Inverse linear demand is given by p1-q where q denotes total market output. (a) Find the equilibrium quantities, price, and profits. (b) Consider now amerger between firms 1 and 2, resulting in a duopolistic market structure. In fact, the merger gives rise to efficiencygains in the sense that the merged entity produces at marginal cost e c, where e < 1. The outsider to the merger stillincurs marginal cost c. Find the post-merger equilibrium quantities, price, and profits. (c) Under what conditions doesthe merger reduce prices? no copy paste answers or chatgpt

Step 1:a. Given informationIn a simultaneous quantity competition, each firm chooses its quantity…

Answered: Consider a homogeneous product industry…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter12: Price And Output Determination: Oligopoly

Section: Chapter Questions

Problem 2E

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