The one-period cournot-nash equilibrium output and price

Assignment Help Microeconomics
Reference no: EM13700887

Suppose two firms supply the market for computer chips and their products are perfect substitutes. The firms choose what quantity to produce independently, i.e. compete as Cournot. The market inverse demand is described by p = 120-20Q, Q measured in millions of chips, p measured in dollars. Each firm has a constant marginal cost of $20.

a. What is the one-period Cournot-Nash equilibrium output and price?

b. What is the output of each firm if they collude to produce the monopoly output?

c. Show that each firm has an incentive to cheat on the collusion.

d. Suppose that interaction between the two firms is repeated infinitely. Show that the collusive outcome which you derived in part (b) can be sustained when the discount factor R > 0.529.

Reference no: EM13700887

Questions Cloud

Estimate the cost of overhauling the fifth unit : Regional Power owns 25 small power generating plants. It has contracted with Genco services to overhaul the power turbines of each of the plants. Th number of hours that Genco billed regional to complete the fourth turbine was 460.
Distinction between safety-health is based on distinction : The distinction between safety and health is based on the distinction between _______. Employers can defend themselves from responsibility for a workplace accident by claiming that _______. The requirement of truthful labeling is an instance of the m..
Proponents of zero inflation argue that even mild inflation : Proponents of zero inflation argue that even mild inflation (1 to 3 percent) reduces the economy's real output.  Do you agree or disagree with this assessment? Why?
Recurrent ups-downs in level of economic activity extending : The recurrent ups and downs in the level of economic activity extending over several years are referred to as business cycles. What are the phases of this cycle and describe what occurs in each phase?
The one-period cournot-nash equilibrium output and price : Suppose two firms supply the market for computer chips and their products are perfect substitutes. The firms choose what quantity to produce independently, i.e. compete as Cournot. The market inverse demand is described by p = 120-20Q, Q measured in ..
Stackelberg game of quantity competition between two firms : Consider a Stackelberg game of quantity competition between two firms. Firm 1 is the leader and firm 2 is the follower. Market demand is described by the inverse demand function p = 100 ? 2Q.
Global production-outsourcing and logistics : Read the opening case on Boeing 787s, and research for the updated information on the Boeing 787s. Identify the pros and cons of assembling a plane with many different parts and manufacturers as Boeing did with the 787. Assess whether Boeing’s approa..
Exporting-importing and countertrade : dentify what FIDO stands for and how 3M puts FIDO into practice. Assess whether FIDO’s approach could work for other companies or if it is unique to 3M and the products they produce. Write three pages on whether 3M’s specific practice of hiring local..
Firms profit will maximize at equilibrium price : Given the demand curve P= 2,000 – 2Q and marginal costs of MC = 1,100 + 2Q, the firm’s profit will maximize at equilibrium price and output of: Based on the demand and cost function in previous question, in a two-part tariff pricing strategy, what is..

Reviews

Write a Review

 

Microeconomics Questions & Answers

  Solve the partial derivative

Solve the partial derivative

  What happens to the interest rate and investment

Suppose that the government increases taxes and government purchases by equal amounts. What happens to the interest rate and investment in response to this balanced-budget change Does your answer depend on the marginal propensity to consume

  1 suppose that the long-run world demand and supply

1. suppose that the long-run world demand and supply elasticities of crude oil are -0.906 and 0.515 respectively.

  Estimate expected demand

If we believe that the laws of supply and demand always hold, explainc why is it that the 'popular' gifts for the holidays always sell out early?

  The purpose of this brief paper is to explain one economic

the purpose of this brief paper is to explain one economic principal that is covered in a short newspaper or magazine

  Explain how a private good is a good or service

The Case in Point on Externalities, Cigarettes, and Smoking suggests that smokers generate: a-external benefits to society by dying early, thereby subsidizing the retirement costs of the rest of the population. b-external costs to society by dying ea..

  Elasticity of demand for long-distance calls

Each demand curve must eventually hit the quantity axis because with limited incomes there is always a value so high that there is no demand for the good.

  Fixed and variable costs

Fixed and Variable Costs

  Whether or not to prescribe the drugs for the patients

What would be the advantages and disadvantages of a regulatory system in which , rather than having the FDA merely published its opinions about the safety and efficiency of drugs and the allowed physicians

  Find the current macroeconomic situation in us eg is us

what is the current macroeconomic situation in the u.s. e.g. is the u.s. economy currently concerned about unemployment

  What conditions would justify supposition of the constant

what conditions would justify the assumption of a constant contribution margin per customer? do you think those

  What happens if the economy is producing a level of output

we know that when an economy starts out at long-run equilibrium and the government cuts taxes, this will result in inflation int he long run. what happens if the economy is producing a level of output below the full employment (long run equilibriu..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd