Consider the following Oligopoly market with two firms which produce a differentiated p
Consider the following Oligopoly market with two firms which produce a differentiated product and have the following demand functions.
q1= 12 – P1 + (P2/ 2)
q2 =12 – P2 + (P1/ 2)
Total Fixed Costs to either firm is 10 dollars and there are no variable costs.
(a) (5 points) Derive the equilibrium prices and quantities that will prevail if the firms do not collude (P*,q*). What amount of profit will each firm gain.
(b) (5 points) If the two firms decide to collude what will be the equilibrium price and total quantity produced in the market (P**,2q**). Find the profits for each firm.
(c) (10 points) Set up a normal form game (box game) which allows each firm (firm 1 and firm 2) to decide between setting the price derived in part (a) or the price derived in part (b). The payoffs to each firm should be the profit they would receive in each scenario.
(d) (5 points) Show clearly the Cournot-Nash equilibrium of the game you created from part
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
