How many firms would be in the market in the spne

Assignment Help Business Economics

Reference no: EM13214827

Cournot Competition with Entry Cost

Consider a market with demand function P = 20 - Q. There are 30 potential competing firms with identical cost functions C(q) = q, but to enter the market they each need to pay an entry cost of 2. In particular, each firm first decides whether it will pay the cost to enter the market; no firm can see others' decisions in this phase. Then the firms who enter the market play Cournot competition.

1. If there are two firms in the market, what are their profits after taking into account the entry cost?

2. Would it be profitable for a third firm to pay the cost to enter the market?

3. How many firms would be in the market in the SPNE?

Reference no: EM13214827

Questions Cloud

Prepare journal entries to record income and deffered tax : On January 1, 2014, Valley Company entered into a 3-year construction contract that had an estimated gross revenue of P3,000,000. The entity used the percentage of completion method in recognizing income on its books.

Learn about ourselves as we learn obout others : What does this mean" learn about ourselves as we learn obout others;conversely, we learn about others through leraning about ourselves"

Classify the economic system of the country : For the country you examined in discussion 1, use the summary of types of economic systems to classify the economic system of the country. Is this an evolving economic system, i.e. a system in transition to another type of system?

Learning theories and principles : What learning principles form the core basis for your teaching? Which new learning principles interest you, and how will you apply them in your teaching? Which of these might form the basis for teacher research?

How many firms would be in the market in the spne : If there are two firms in the market, what are their profits after taking into account the entry cost?

What conclusions concerning the relative profitability : What conclusions concerning the relative profitability, liquidity, long-run solvency, and the efficiency of assets can be drawn from your analysis above (compare and contrast the two competitors using specific financial measures from the analysis ..

Why workers in some countries have more capital : What institutions explain why workers in some countries have more capital than workers in other countries?

Cold war politics and assumptions shape foreign policy : How did Cold War politics and assumptions shape American foreign policy in these years? What were the key interventions the United States made in Europe and the Third World?

Describe the benefits and costs of international trade : Absolute and comparative advantage: Explain how these concepts describe the benefits and costs of international trade.

User Account

All Pages