Reference no: EM13956205
Firm A operates on two markets, M and D. Firm A is a monopolist on market M. However, on market D, firm A faces a competitor, firm B. Competition on market D takes the form of Cournot competition. Firm B operates only on market D. If a total quantity of q is offered on any particular market then the price on that market is D(q)-q whenever q ? [0,1] (and D(q) if q>1). The firms have identical cost functions. Specifically, a firm that produces a total quantity of q across the markets on which it is active incurs total costs of c(q)^2. Note that marginal costs are not constant. Let qb denote firm B's quantity on market D. Similarly, let qa denote firm A's quantity on market D. Finally, let qm denote firm A's quantity on market M. Note that firm A's action is a pair (qa,qm), since it has to decide how much to sell on both market D and market M. Firm A's total production is thus qa+qm. Assume that 0 = qa, qb, qm =1.
a) Derive the two firms' best response functions. Verify that if firm A responds to qb by selling on both markets (i.e. qa>0 and qm>0) then marginal revenues are the same on both markets. Explain the intuition.
b) For any qb, determine on which market firm A responds by selling the larger quantity. Explain the economic intuition. How do qa and qm change as qb changes? Explain the intuition
c) Is there a Nash equilibrium in which firm A is not active on market D (i.e. qa=0)? Prove and explain your answer.
d) Derive a Nash equilibrium in which firm A is active on both markets. Which firm produces more on market D? Carefully explain the economic intuition. Which firm produces more in total? Explain the intuition.
|
Find the prob. that they get such a family.
: Find the prob. that they get such a family and the boy is the youngest
|
|
Assessment of the relative riskiness of investing
: The S&P stock index represents a portfolio comprised of 500 large publicly traded companies. On December 24, 2007, the index had a value of 1,410 and on December 24, 2008, the index was approximately 905. The rate of return earned on the S&P 500 is? ..
|
|
What activities do the u.s. anti-bribery provisions prohibit
: Are companies obligated to disclose information concerning potential bribery (like the above fact scenario) in their filings, and if so, when are they required to do so?
|
|
What category of ip has paraworld most likely infringed
: Assume ParaWorld was eventually ordered to cease and desist due to IP infringement. What category of IP has ParaWorld most likely infringed? Explain the actions that constitute such an infringement.
|
|
Derive the two firms best response functions
: Derive the two firms' best response functions. Verify that if firm A responds to qb by selling on both markets (i.e. qa>0 and qm>0) then marginal revenues are the same on both markets. Explain the intuition.
|
|
How would standards change for the science honors program
: In this situation, what is the ?price? that determines how many students will apply to the honors program? Also, assume that the people who run the honors program do not plan to expand or contract it. Depict the demand and supply curves that repre..
|
|
What would the cash option payout be
: The cash option amount is determined by discounting the winning amount at 7% over 20 years. This week the lottery is worth $6 million to a single winner. What would the cash option payout be?
|
|
Determine the? p-value for this test
: Consider the hypotheses shown below. Given that x overbar = 113, σ=25?, n=48, α=.10?, complete parts a and b. Upper H 0H0?: μ=119 Upper H 1H1?: μ ≠119. What conclusion should be? drawn? Determine the? p-value for this test.
|
|
What is nominal rate of return on TIPS bond in first year
: Consider a newly issued TIPS bond with a 3-year maturity, par value of $1,000, and coupon rate of 5.40%. Assume annual coupon payments. Time Inflation in Year Just Ended Par Value Coupon Payment + Principal Repayment = Total Payment 0 $ 1,000.00 1 3...
|