Log in
Economics
2
answers
0
watching
254
views

Two identical firms compete in competition (Cournot competition) in the same market where the inverse demand is P(Q) = 100 − Q. The constant marginal cost of both firms is 10.

(a) Find the best response function for each firm.

(b) What is the Cournot (simultaneous) equilibrium?

(c) What is the Stackelberg (sequential) equilibrium if firm 1 chooses quantity first?

Watch
2
answers
0
watching
254
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share
Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Two firms compete by setting quantities. Firm A has a marginal cost of 10, while Firm B has a marginal cost of 20. The demand function is given by: p = 90 – Q/2, where Q = qA + qB. 

a. What are the equilibrium quantities if both firms set quantities simultaneously (Cournot competition)? 

b. What are the equilibrium quantities if Firm A sets quantity first (Stackelberg competition)?

Stackelberg Duopoly:

Two firms both have the same constant marginal cost of $20 and zero fixed cost; market price P = 140 - 2(q1 + q2). Both firms choose outputs to compete.

(a) Find the subgame perfect equilibrium outcome of the Stackelberg Duopoly game with firm 1 moving first. First, solve for the follower's (firm 2's) best response function. Then solve for the leader's optimal strategy.

(b) Find the Nash equilibrium of the Cournot duopoly under the same assumptions on costs and demand.

(c) Compare the two equilibria. Discuss the differences.

Suppose that inverse demand is given by p(Q) = a-bQ, where Q is total quantity supplied in the market. There are two firms in the market, each with a cost function of c(q) = cq, now assume that the first firm moves before the second firm.

A) Compare the price level and level of output under Stackelberg to Cournot

B) What is the fundamental reason that the first firm in the stackelberg model is able to earn higher profits than in the Cournot model

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in