ECON 465 Chapter Notes -Pennsylvania Route 10, Best Response, Marginal Revenue

50 views7 pages
School
Department
Course

Document Summary

The equilibria are the two off-diagonal elements. (b) to solve this problem we need to use expected values. If player b chooses to stay his expected payoff is given by the payoffs to staying weighted by the probabilities that player a will stay or swerve. Note: because of the fixed cost, there are two other asymmetric equilibria. At each, one firm produces its monopoly output and the other produces none. We assume that in this case, a symmetric equilibrium is more reasonable than an asymmetric equilibrium. To determine my best response function, i equate my marginal revenue with my marginal cost. Therefore, (cid:222) (cid:222) (cid:222) (cid:247) (cid:246) (cid:231) (cid:230) (cid:222) (cid:246) (cid:231) (cid:230) (cid:229) (cid:229) , assuming that if both firms charge the same price, then the firms split the p. Problem 1 (a) at equilibrium market evenly. (b) the higher cost firm makes zero profit, whereas the lower cost firm"s profit is.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

Related Questions