What are the differences between ver and quota

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1. Consider the case of two theaters, Jay's Cinema (JC) and Mezzanine Inc. (MI) with market power. The inverse demand for theater tickets is given as P = 220 - 5Q, where quantity is measured in thousands of theater tickets per year, representing the combined production of JC and MI, Q = qJC + qMI, and price is measured in dollars per ticket. JC has a marginal cost of $12 per ticket, and MI has a marginal cost of $10. Suppose the market is a Stackelberg oligopoly and MI is the first mover. How much profit does each firm earn? Is the outcome intuitive or counter-intuitive? Interpret the results.

2. Read the article "c3 Berry et al. - VER on Automobiles.pdf" below. "Berry, Levinsohn, and Pakes (1995)" evaluate the voluntary export restraint (VER) that was imposed on exports of automobiles from Japan in 1981. What are their findings? What policy implications can we draw out of it? What are the differences between "VER" and "quota?" Would imposing a quota instead of the VER lead to different economic outcomes?

Reference no: EM133627247

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