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Use a model with horisontal productdifferentiation. Suppose that two firms compete. They are situated at opposite sides on a linje with length 1. Firm 1 in point 0, and firm 2 in point 1. The konsumers transport costs are linear in the distence to the firms localisation (denoted d1 and d2), and the consumers are uniformly distributed on the interval (0,1) where x in (0,1) denotes the consumers preferences (localisation).
The consumer buys maximum one unit of the good, either from firm 1 or firm 2. The utility of consumer x by buying from firm i is given by
\(u = s-p_{i}-t|x-d_{i}|\)
where s is the maximum willingness to pay and t is transport costs for each "distance-unit" between the consumer and the firm's localisation.
The firm's have constant marginalcosts denoted c1 and c2.
a) Find the two firms reactionfunctions,
\(p_{i}=R_{i}(p_{j})\)
b) Find the two firm's Nash-equilibrium prices (as a function of the two marginal costs c1 and c2) and the firms profit.
The Demand for sugar in Canada in terms of it's price, P, was once estimated to be QD = 135 - 8P. If this equation were valid today, calculate the following: (a) How much would be demanded at P = 10 b) How much would be demanded if the sugar were fre..
According to the News on page 677, what percentage of retail jobs would be lost if the minimum wage were increased to $9.50 Obama Wants $9.50 Minimum Wage (Crains)- When Barack Obama and his fellow Democrats take power in Washington.
Suppose that the Fed raises the reserve requirement on transactions deposits to 0.18 = 18%. What happens to Princeton Bank's balance sheet Does it have excess reserves, or is it short of reserves? Calculate the new M1 and M2 multipliers. What happ..
What are the levels of saving and actual investment In which direction and by what amount will unplanned investment change as the economy moves from the $410 billion level of GDP to the equilibrium level of real GDP
Alpha Corporation has outstanding an issue of preferred stock with a par value of $100. It pays an annual dividend equal to 8 percent of par value. If the required return on Alpha's preferred stock is 6 percent, and if Alpha pays its next dividend..
The Eastern Shuttle Inc., is a regional airline providing shuttle service between New York and Washington, DC. An analysis of the monthly demand for service has revealed the following demand relation
If your bank held 3% of the units issued by a unit trust and the mortgages in the trust repaid $15,000,000 in interest and $2,300,000 in principal in its first year, how much principal and interest would your bank receive that year
competitive brand of cornfl akes, in dollars per 10- ounce box P M = price of milk, in dollars per quart A = advertising expenditures of CFC cornfl akes, in hundreds of thousands of dollars per year This year, P X = $ 2, I = $ 4, P Y = $ 2.50, P M..
michelle has the comparative advantage in potatoes. James has the comparative advantage in chickens. If they each specialize in the field in which they have the advantage and then trade at the rate of 2.5 pounds of potatoes to 1 chiken,
Suppose the market demand function is given by: Q = 100 - 2P , where Q: total quantity, P: market price. And in this market there are two firms with MC=AV=$10. Find each of the following: 1. Perfect competition price, quantity, and consumer surplus
a. If the theater uses third degree price discrimination, what price will it charge for daytime tickets How many will be sold b. If the theater uses third degree price discrimination, what price will it charge for nighttime ticket How many will be ..
When Iraq invaded Kuwait in 1990, the market price of crude petroleum jumped from $21.54 per barrel to $30.50 per barrel - an increase of almost 42 percent. Your boss is puzzled, because the price increase actually occurred
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