Derive best-response functions for these firms expressing

Assignment Help Business Economics

Reference no: EM13984143

Two identical firms compete simultaneously as a Cournot duopoly. The market demand is P = 200 - 2~ where Q stands for the combined output of the two firms, Q = q, + q2. The total cost function for firm 1 is C1 = 60 + 16ql. The total cost function for firm 2 is C2 = 50 + 24q2.

a) Derive the best-response functions for these firms expressing what ql and q2 should be in this Cournot oligopoly.

b) Find the optimal quantity for each firm, the market price, and the profit each firm earns in this Cournot oligopoly.

c) Now suppose that with the same market demand and cost conditions as above, Firm 1 may bring its product to market earlier and choose its output level earlier than Firm 2 by spending an additional investment of 200. Explain carefully if Firm 1 will benefit from being first to market.

d) Should firm 2 try to undercut Firm 1 on price and try to gain additional sales by reducing its price below Firm l's level? Explain.

Reference no: EM13984143

Questions Cloud

What is regionalism : What is regionalism? Use European Union as an example to illustrate the major steps toward regional integration. What major features can you identify for regional integration in Europe, North America and East Asia? what are the dynamics for regional ..

Production technology summarized by production function : Sam has preferences for consumption goods (C) and time spent on leisure (L). The utility function is u(C,L) = CL. The household also has a home production technology summarized by a production function. How much time will Sam spend in leisure? How ma..

The ideas of faulty framing and cognitive dissonance : Give two personal examples where you made a decision based on sunk costs. What would an economist have done in those situations? Explain. Explain the ideas of faulty framing and cognitive dissonance in your own words.

Learning process at many schools is being compromised : The learning process at many schools is being compromised. Instead of focusing on their education, students are concerned with their appearances. Fashion choices are of higher importance than completing homework assignments and passing tests. School ..

Derive best-response functions for these firms expressing : Two identical firms compete simultaneously as a Cournot duopoly. The market demand is P = 200 - 2~ where Q stands for the combined output of the two firms, Q = q, + q2. The total cost function for firm 1 is C1 = 60 + 16ql. The total cost function for..

Read the excerpt from first generation : Read the excerpt from “First Generation” of Dreaming in Cuban, by Cristina Garcia. She considers the vagaries of sports, the happenstance of El Líder, a star pitcher in his youth, narrowly missing a baseball career in America. His wicked curveball at..

Her english reflected the quality : Read the excerpt from Amy Tan’s essay “Mother Tongue.”I know this for a fact, because when I was growing up, my mother’s “limited” English limited my perception of her. I was ashamed of her English. I believed that her English reflected the quality o..

Preferences for consumption goods-and time spent on leisure : Sam has preferences for consumption goods (C) and time spent on leisure (L). The utility function is u(C,L) = CL. The household also has a home production technology summarized by a production function. How much time will Sam spend in leisure? How ma..

What is the value of an sdr in dollar terms : Calculate the Value of SDR given that SDR is equal to: $66, .42 €, 12.5¥, and .111£. And today's exchange rates are as follows: What is the value of an SDR in dollar terms?

User Account

All Pages