In a competitive duopoly setting group pricing allows firms to extract each consumer while at the same time it ____________ When the quality of information is sufficiently large, the former effect the latter. from
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- Suppose that in the market for cell phone service the number of competitors has dwindled until D & C Romer Net and Spa T. Wireless have become the only providers left in the nation. Seeking to boost their profits, the two companies secretly agree to a coordinated increase in their prices for cell phone minutes. This practice is known as a Nash equilibrium. O tying. collusion. antitrust. predatory pricing.The graph below shows a demand curve for a firm operating in an oligopolistic market. Kinked Demand Price 100 90 80 70 60 50 40 30 20 10 0 MR Quantity D 10 20 30 40 50 60 70 80 90 100 MC O relatively more elastic. O relatively more inelastic. O perfectly elastic. O perfectly inelastic. Compared to a price of $75, at a price of $60 demand is OFirms J and K produce compact-disc players and compete againstone another. Each firm can develop either an economy player (E)or a deluxe player (D). According to the best available marketresearch, the firms’ resulting profits are given by the accompanyingpayoff table.a. The firms make their decision independently, and each is seeking itsown maximum profit. Is it possible to make a confident predictionconcerning their actions and the outcome? Explain.Firm KE DE 30, 55 50, 60 Firm JD 40, 75 25, 50b. Suppose that firm J has a lead in development and so can move first.What action should J take, and what will be K’s response?c. What will be the outcome if firm K can move first?
- Massive advertisement by Oligopoly and Monopolistic fims i called the practice of non-price competition by which they seem to cause inefficiency in production and distribution of their products. Any government attempt to legislate to limit the cost of advertisement at specific level, the firms will never welcome that possible restriction on their advertisement cost because O t willreluce the power of maintalning their barrier to entry of new firms into the market to take away their market shares O twill lower their profit O itwill increase their cost of sales O twill incur massive lossConsider the Cournot duopoly with linear demand function ? = 2000 − 2Q, where P is the price and Q = q1 + q2 is the total supply. Firm 1 and firm 2 has constant marginal cost of 600. Just answer the E, F and G, thank you bartleby! a. If firm compete in price, draw in detail the best response of each firm.b. Determine and explain the Bertrand equilibrium.c. What is the equilibrium quantity and how much profit for each firm?d. Explain the Bertrand Paradox in (c)!e. If firm 1 has capacity of production 450 and firm 2 has capacity of 200. Determine the Bertrand equilibrium.f. What is the equilibrium quantity, and how much profit for each firm?g. Is there any paradox in (f)?PRICE ($) 10 O D₁ED₁. O D₂ED2. O D₁ED₂. D2 O D₂ED 1. DI 2000 Sandy's Salmon is an oligopoly. Sandy's rival firms match price decreases but not price increases. Consequently, we expect Sandy's demand curve to likely be (from left to right) QUANTITY DI D2
- Discuss Many electronics stores like EMAX, and Jumbo have low-price guaranteepolicies. At a minimum, these guarantees promise to match a rival’s price, and somepromise to beat the lowest advertised price by a given percentage. Do these types ofpricing strategies result in cutthroat competition and zero economic profits? If not, whynot? If so, suggest an alternative pricing strategy that will permit these firms to earnpositive economic profits.Refer to the figure at right. Two firms operating in the same market must choose between a collude price and a cheat price. Firm A's profit is listed before the comma, B's outcome after the comma. If each firm tries to choose a price that is best for it, regardless of the other firm's price, which of these statements is correct? O A. Both firms should charge a cheat price. OB. Firm A should charge the collude price; Firm B should charge a cheat price. C. D. Both firms should charge a collude price. Firm A should charge a cheat price; Firm B should charge a collude price. Cheat Price Firm A Firm B Cheat Price Collude Price Collude Price 18, 18 6,30 30,6 24, 24The most important factor that drives the long-run profit to zero in monopolistic competition is the elasticity of the market demand curve the elasticity of the firm's demand curve free entry and exit O the reaction of rival firms to a change in price What is one difference between the Cournot and Stackelberg models? O In Cournot, both firms make price decisions simultaneously, and in Stackelberg, one firm sets its price level first O In Stackelberg, both firms make price decisions simultaneously, and in Cournot, one firm sets its price level first O In Cournot, both firms make output decisions simultaneously, and in Stackelberg, one firm sets its output level first O In Stackelberg, both firms make output decisions simultaneously, and in Cournot, one firm sets its output level first O Profits are zero in Cournot and positive in Stackelberg
- 16:04 AM • ll l 16%! eclass.uonbi.ac.ke/mod/qu 2 If a duopolist has a linear demand curve of the form Q=400 – P. Assuming each firm has total cost (TC=3000+100Q). Calculate the profit- maximizing price-quantity combinations using the following four oligopoly pricing models listed below demonstrating that: а. Under the Cournot model, both firms will earn same level of profit and determine industry profit and explain why this is would be the case. b. Under the Cartel model each firm earns a higher profit than under Cournot. Under the Quasi-competitive model, the firm will make a loss equivalent to fixed cost. С. d. Under the Stackelberg's model the leader will earn more than twice the profit of the follower and that total industry profits will be lower than under both Cournot and Cartel models. Explain why this is would be the case. I + II II !!!3. Consider a duopoly with a demand curve given by P = a -bQ, where a and b are positive constants and Q is the total production by the two firms. Firms sell identical goods and have an identical constant marginal cost of production c. Fixed costs are equal to zero. We assume firms choose quantities simultaneously (Cournot competition). a. Obtain the first order condition of profit maximization for each firm. Use graphical analysis and economic intuition to explain what they represent. b. Obtain the profit maximizing quantity for each firm. Explain what they represent using game theory concepts c. Demonstrate using relevant graphical analysis and economic intuition that the results obtained in b are not a Pareto Optimum for the firms involved. d. How would the graphical analysis in part a change if Firm A had a fixed cost of productionMa3. You operate in a duopoly in which you and a rival must simultaneously decide what price to charge for the same homogeneous product. Assume each you and your rival can choose a “low price” or a “high price”. If you each charge a low price, you each earn zero profits. If you each charge a high price, you each earn profits of $3 million. If you charge different prices, the one charging the high price loses $5 million and the one charging the low price makes $5 million. What is the Nash equilibrium for the non-repeated version of this game? Now suppose the game is infinitely repeated. If the interest rate is 10%, can you do better than you could in the non-repeated version of this game? If your answer is “yes”, provide the players’ strategies and any other conditions that must hold.
