Reference no: EM133317027

Acme faces the following cost of producing these firetrucks: C(q) = 300 + q. and the following market demand: Q(P) = 75-0.5P. Consider that Acme has a single competitor, Best, which faces the following cost function: C(q) = 100 + 2q.

(a) Acme and Best are Cournot duopolists. Acme is choosing between q={10, 20, 30} and Best is choosing between q={10, 30}. Draw the payoff matrix associated with this game.

(b) Given the scenario in (a), what is Acme's strategy? What is Best's strategy? What is the equilibrium outcome of the game?

(c) Now consider that Acme and Best compete in a Stackelberg game and Acme moves first? Draw the game tree associated with this game.

(d) Given the scenario in (c), what is the equilibrium outcome of the game?

(e) Now consider that Acme and Best are Bertrand duopolists (and all fixed costs are sunk). What is Acme's strategy? What is Best's strategy? What is the equilibrium market price?

(f) Continue to consider that Acme and Best are Bertrand duopolists (and all fixed costs are sunk). How does your answer to (e) change when we move to a sequential-move situation where Acme moves first? Discuss in two sentences or less.