In a market there are five firms, all have a total cost curve equal to CT = 2q. The market demand is Q = 500 - 5P. How much profit would each firm get if they collude and share the market equitably? What is the profit to each firm if they agree to collude, but one firm misleads the others charging a slightly lower price? What is the profit if all firms do not collude and compete via price?
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In a market there are five firms, all have a total cost curve equal to CT = 2q. The market demand is Q = 500 - 5P.
How much profit would each firm get if they collude and share the market equitably? What is the profit to each firm if they agree to collude, but one firm misleads the others charging a slightly lower price? What is the profit if all firms do not collude and compete via price?
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- Price competition between firms, from the firms’ perspective, can be similar to the prisoners’ dilemma. The best outcome for all firms would be for all to charge a high price. However, if the other firms charge a high price, any individual firm has incentives to charge a low price and steal the market. Additionally, if any other firm chooses a low price, each firm should charge a low price too so that it doesn’t get priced out of the market. Explain how price-matching (firms announcing a policy where they match the lowest price a customer can find or will honor a competitor’s coupon) can help firms avoid the Nash equilibrium in which they all charge a low price. Is it misleading for a firm to advertise price-matching as being beneficial to consumers? (Hint: What outcomes of the game are ruled out by the price-matching policy? How does ruling out these outcomes change the game and the decision the firms face?)Price competition between firms, from the firms’ perspective, can be similar to the prisoners’ dilemma. The best outcome for all firms would be for all to charge a high price. However, if the other firms charge a high price, any individual firm has incentives to charge a low price and steal the market. Additionally, if any other firm chooses a low price, each firm should charge a low price too so that it doesn’t get priced out of the market. Explain how price-matching (firms announcing a policy where they match the lowest price a customer can find or will honor a competitor’s coupon) can help firms avoid the Nash equilibrium in which they all charge a low price. Is it misleading for a firm to advertise price-matching as being beneficial to consumers? What outcomes of the game are ruled out by the price-matching policy? How does ruling out these outcomes change the game and the decision the firms face?Economics Reference the following information about the market demand function for questions 1 to 15. These questions are on different types of market structures – monopoly, perfect competition, Cournot oligopoly market, and the Stackelberg oligopoly market. The market demand function is given the following equation: P = 2000 – Q where Q is the industry’s output level. Suppose initially this market is served by a single firm. Let the total cost function of this firm be given the function C(Q) = 200Q. The firm’s marginal cost of production (MC) is equal to the firm’s average cost (AC): MC = AC = 200. Now suppose the two firms engage in Stackelberg market competition. Assume firm 1 is the leader (first-mover) and firm 2 is the follower firm (second-mover). Marginal profit function of Stackelberg leader: 900−Q1 QUESTION 14: What will be the market price in this Stackelberg model? Group of answer choices $480 $650 $720 $900 QUESTION 15: Can you calculate the profit earned by the…
- What are the incentives for firms in an oligopoly to collude or work together? Has price collusion happened in the past?There are only two driveway paving companies in a small town, Asphalt, Inc. and Blacktop Bros. The inverse demand curve for the services is ? = 2040 − 20?where quantity is measured in pave jobs per month and price, in dollars per job. The firms have an identical marginal cost of $200 per driveway. If the two firms collude, splitting the work and profits evenly, how many driveways will each firm pave, and at what price? How much profit will each firm make? Does Asphalt have an incentive to cheat by paving one more driveway each month? Show it numerically.Evaluate the following: “Since a rival’s profit-maximizing price and output depend on its marginal cost and not its fixed costs, a firm cannot profitably lessen competition by implementing a strategy that raises its rival’s fixed costs.”
- Suppose that Raleigh and Dawes are the only sellers of bicycles in the UK. The inverse market demand function for bicycles is P(Y)=200-2Y. Both firms have the same total cost function: TC(Y)=12Y and the same marginal cost: MC(Y)=12. Suppose this market is a Stackelberg oligopoly, and Raleigh is the first mover. Write down a formula for the reaction function of Dawes. Calculate the equilibrium quantity that each firm produces and the equilibrium price in the market. Give typing answer with explanation and conclusionPlease solve it quickly you can upload handwritten answer also. Consider Atlanta as an oligopoly market with five airlines that behave in a Cournot Model fashion. The Atlanta market demand schedule is: P = 390 - .5*Q. The Cost schedule for Delta is: MC=AC=Scomp=80. The Cost schedule for the other four firms (United, Southwest, et al) is: MC=AC=Scomp=40. What is Delta’s new market share?Two firms Intel and AMD in the CPU market have combined demand given by Q = 100 - P. Their total costs are given by TC Intel = 4 Q Intel + 2 Q Intel^2 and TC AMD = 4 Q AMD + 2 Q AMD^2. If they successfully collude, the market price will be??
- In January 2007, XM enjoyed about 58 percent of satellite radio subscribers, and Sirius had the remaining 42 percent. Both firms were suffering losses, despite their dominance in the satellite radio market. In 2008, the DOJ decided not to challenge a merger, and these two firms united to become Sirius XM. If you were an economic consultant for Sirius, what economic arguments would you have presented to the DOJ to persuade it not to challenge the merger? ExplainSuppose two firms, Firm A and Firm B, are competing by setting quantities (Cournot competition). Firm A has a constant marginal cost of $10 per unit; Firm B has a constant marginal cost of $15 per unit. Assume fixed costs are equal to 0 for both firms. Hint: since fixed costs are zero and the marginal cost is constant, MC = AC. The two firms choose between producing 50 units or 100 units. If the total output is 100 units, the price is $20 per unit; if total output is 150 units, the price is $15 per unit; if total output is 200 units, the price is $10 per unit. Based on the information provided, fill in the firms’ profits in the payoff matrix below with Firm A choosing the row and Firm B choosing the column. QB=100 QB=50 QA=100 , , QA=50 , , The resulting equilibrium is for Firm A to produce ____ (50 or 100)units and Firm B to produce_____ (50 or 100) units.What are the incentives for firms in an oligopoly to collude or work together? Explain a past case on price collusion.
