State the profit maximization problem of firm, Game Theory

1. Consider two firms producing an identical product in a market where the demand is described by p = 1; 200 2Y. The corresponding cost functions are c1 (y1) = y21 and c2 (y2) = 3y22.

(a) State the profit maximization problem of firm 1 and use the first order condition to derive firm 1's reaction function.

(b) State the profit maximization problem of firm 2 and use the first order condition to derive firm 2's reaction function.

(c) Solve the system of reaction functions to identify how much each firm is producing; what is the market quantity, the market price, and the corresponding individual and collective profits.

(d) Assuming that the firms can coordinate their actions, what are the individual quantities produced the market quantity, the market price, and the resulting joint profits?

(e) How will the firms distribute the joint profits (Hint: find the minimum amount that each firm is willing to accept and the maximum amount available for each firm under the cartel agreement ). Is this form of cooperation sustainable? Explain.

Posted Date: 3/22/2013 6:36:21 AM | Location : United States







Related Discussions:- State the profit maximization problem of firm, Assignment Help, Ask Question on State the profit maximization problem of firm, Get Answer, Expert's Help, State the profit maximization problem of firm Discussions

Write discussion on State the profit maximization problem of firm
Your posts are moderated
Related Questions
What is the Iterated Dominant Strategy Equilibrium (IDSE) and associated pay-offs? Type your answer in the following form: (c,B) , (6, 4) if you think the outcome is


Identification is closely related to the estimation of the model. If an equation is identified, its coefficient can, in general, be statistically estimated. In particula

A set of colluding bidders. Ring participants agree to rig bids by agreeing not to bid against each other, either by avoiding the auction or by placing phony (phantom) bids.

In econometric theory two possibie situations of identifiability can arise: Equation under,consideration is identified or not identified: 1) Equation is under-identified-

A game is one among complete data if all factors of the sport are common information. Specifically, every player is awake to all different players, the timing of the sport, and als

Equilibrium payoffs are (4, 5). Player A’s equilibrium strategy is “S then S if n and then N if n again.” Player B’s equilibrium strategy is “n if S and then n if S again and then

Paired Prisoners' Dilemma Students can be paired off and instructed to play several ver-sions of a particular game with a prisoners' dilemma structure.Provide each pair with a

Please let me know if you can assist with the following assignment immediately. http://www.viewdocsonline.com/document/vkz2u6

The ideas underlying game theory have appeared throughout history, apparent within the bible, the Talmud, the works of Descartes and Sun Tzu, and also the writings of Chales Darwin