Corner solution of one firm pricing at the monopoly price

Assignment Help Business Economics

Reference no: EM131101231

Let the inverse demand curve be p(q) = a − bq. Suppose there are two firms, with constant marginal cost equal to C.

Now suppose that the two firm engage in price competition (set p) instead of quantity competition (set q).

1. (Bertrand) If both firms move simultaneously, what are their equilibrium strategies and what is the equilibrium outcome?

2. Compare the efficiency of this outcome to that of Cournot and Stackelberg.

3. If the firms have different marginal costs, how does your answer to part 1 change?

4. Explain the corner solution of one firm pricing at the monopoly’s price.

Reference no: EM131101231

Questions Cloud

Promote stability of financial markets because : The Fed seeks to promote stability of financial markets because

Relationship between social auditing and crisis management : What is the relationship between social auditing and crisis management? What can organizations do to become better prepared for preventing and responding to ethical misconduct?

Two main monetary policy targets : The Fed's two main monetary policy targets are _____. Of these, the FED chooses to target _____.

What would happen with long run aggregate supply curve : Consider the scenario in which the Fed is implementing a contractionary monetary policy aimed at alleviating inflationary pressures.In this regard please provide an answer to the questions listed below. What would happen with the short run aggregate ..

Corner solution of one firm pricing at the monopoly price : Let the inverse demand curve be p(q) = a − bq. Suppose there are two firms, with constant marginal cost equal to C. If both firms move simultaneously, what are their equilibrium strategies and what is the equilibrium outcome? Compare the efficiency ..

What are equilibrium strategies and equilibrium outcome : Let the inverse demand curve be p(q) = a − bq. Suppose there are two firms, with constant marginal cost equal to C. what are their equilibrium strategies and what is the equilibrium outcome?

Equilibrium strategies of two firms under the assumption : Let the inverse demand curve be p(q) = a − bq. Suppose there are two firms, with constant marginal cost equal to C. What are the equilibrium strategies of the two firms under the assumption the entire market is served.

Employing constant rate of growth forecasting model : Fred’s Hardware and Hobby House expects its sales to increase at a constant rate of 8 percent per year over the next three years. Current sales are $100,000. Forecast sales for each of the next three years. What are some of the hazards of employing a..

Determine the capitalized cost for each design : Two incinerators are being considered by a waste management company. Design A has an initial cost of $2,650,000, has annual operating and maintenance costs of $750,000, and requires overhauls every 5 years at a cost of $1,375,000. Using a 6.5 %/year ..

User Account

All Pages