Find the inverse market demand curve

Assignment Help Business Economics

Reference no: EM13983972

Consider the following duopoly game: each of 2 firms can produce as much of a good as he wishes at marginal cost 1 (i.e., producing q units costs 1q = q in total), and the market demand curve is given by Q(p) = 10p - p.

(a) Find the inverse market demand curve, specifying the price at which Q units can be sold.

(b) Write out each firms profit expression, if firm 1 produces quantity q1 and firm 2 produces quantity q2.

(c) We found in class that the NE of this game is for each firm to produce 3 units. If you did (c) correctly, you will see that this yields a profit of 9 to each firm. However, if firms could agree at the start to each produce only 2 units, they would both earn a higher profit, namely 10. Explain why such an agreement might not work. The profit-maximizing quantity, Q.

Reference no: EM13983972

Questions Cloud

Assume that the economy is starting at long-run equilibrium : Assume that the economy is starting at a long-run equilibrium. Suppose firms become very optimistic about business conditions and invest heavily in new capital equipment. Assume there is no change in the long-run aggregate supply curve. What is the e..

Transfer pricing is a contentious issue : Transfer pricing is a contentious issue for almost any company where divisions buy from or sell to each other. Stated another way, transfer pricing causes more conflict between divisions than almost any other issue. Give an example about this issue. ..

How much does the money supply change : The banking system currently has $100 billion of new reserves, none of which are excess. People hold only deposits and no currency and the reserve requirement is 10%. If the Fed lowers the reserve requirement to 8% and at the same time buys $10 billi..

Dialectic materialism refers to which of the concepts : Dialectic materialism refers to which of the following concepts?

Find the inverse market demand curve : Consider the following duopoly game: each of 2 firms can produce as much of a good as he wishes at marginal cost 1 (i.e., producing q units costs 1q = q in total), and the market demand curve is given by Q(p) = 10p - p. Find the inverse market demand..

Compute sunflowers optimal price and output combination : Sunflower Inc. is a major supplier of reverse osmosis and ultra filtration equipment, which helps industrial and commercial customers achieve improved production processes and a cleaner work environment. Compute Sunflower's optimal price/ output com..

Game theory-stag-hunt game : Game Theory (Stag-Hunt Game): N players go hunting; each can choose to hunt either stag or hare, so the set of actions available to each player is {S,H} (S stands for hunt stag, H stands for hunt hare). If all N players hunt S, then each gets payoff ..

What is elasticity of demand with respect to adverting : The following equation represents the weekly demand that a local theater faces. Determine the profit maximizing ticket price for the theater. What is the price elasticity of its demand at this price? What is the elasticity of its demand with respect..

Demand is best defined as the relationship between : Demand" is best defined as the relationship between:

User Account

All Pages