Reference no: EM131936312

Industrial Economics Assignment

1. 4 companies are competing with Cournot on the property market. The marginal cost of production of each enterprise is constant and equal to 10. The demand function is given by Q = 100 - p, where Q is the quantity demanded and p is the selling price of the good. Give the best answers from each company.

2. Determine the balance of Cournot.

3. Two of them merge. Determine the new Cournot balance following the merger.

4. How do prices and profits vary following the merger?

5. How do the quantities vary as a result of the merger?

6. Can the merger increase the profits of the two merged companies in the short term (will you define the term short term)?

7. Following the merger the cost (marginal of production) of the two merged companies becomes equal to 10-e. Determine the balance of Cournot.

8. For which level of o does the merger increase the aggregate surplus? The surplus of the consumer is equal to Q^2/2 where Q denotes the total quantity produced.

9. In order to reduce their profit in competition with La Cournot, the state makes companies pay a tax of t euros per unit produced. Determine the balance of Cournot.

10. How does the aggregate surplus vary when the tax t increases?

11. What should be the level of the optimal "tax" from the point of view of aggregate surplus? (without calculation).

12. Build the normal form of a game that has no Nash equilibrium in pure strategies and the normal form of a game with a dominant strategy and a dominated strategy.

13. Determine the perfect Nash equilibria in the game: "An entrant (JI) chooses to enter (E) or not to enter (NE) into a market, and in the second period, the incumbent (J2) decides to fight her (C) or to accommodate her (A). " The gains are (1,3) if J1 chooses NE, and if it enters, (-3, -1) if the outcome is (E, C) and (2,X) if (E, A).

14. What is the condition on the threat of "fighting if entered" is credible?

15. Are there other non-perfect balances in play?

16. Information is taken from question fi with two firms. Define the competition game in Bertrand's prize.

17. What will be the price of Bertrand's balance?

18. Show that (pe, pe) is actually a Nash equilibrium of this game.

19. Set that (under a condition to be specified) the best answer for a company is to offer a lower price than its competitor.