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Suppose that there are three firms, who produce homogeneous products, and whom have the same marginal cost which is constant over output. These firms play an infinitely repeated Bertrand pricing game. Each period they simultaneously set prices. One period monopoly profits are given by ?M. Firms 1 and 2 have discount factors of 0.8, while Firm 3 has a discount factor of 0.6. (a) Supposing that when the three firms set the same price they share the market evenly, demonstrate that collusion at the monopoly price is not sustainable, using the Bertrand Nash Equilibrium of marginal cost pricing forever as the punishment strategy. Explain and show your work. (b)Suppose now that when all three firms set the same price, they do not share the market equally. Rather, when all three firms set the same price, Firms 1 and 2 each get a share of the market equal to ?<1/3; Firm 3's market share is 1 - 2 f, which is bigger than 1/3. It is still the case that when a firm undercuts the others, it serves the entire market. Are there any values of f for which collusion is now sustainable using the Bertrand Nash Equilibrium of marginal cost pricing forever as the punishment strategy?
Christy maintains her inventory levels through borrowing cash on daily basis from bank. She estimates demand for cash for the coming year will be $17,000 per day.
Entry of firms in a monopolistically competitive industry is characterized by two "external" effects. What are these effects and how do they affect a monopolistically competitive firm. How are consumers and incumbent firms influenced by these exte..
If the government imposes consumption tax on the good that raised prices by $1, by how much will the consumer's surplus change? Show the relationship between EV, CV, and consumer surplus using compensated and uncompensated demand curves. If you your..
Utilizing the link and the instructions to follow, create a graph of the US GDP relative to Debt from the period 1981 to 2010.
The frequency distribution below was constructed from data collected from a group of 25 students. I need the solutions. Height in Inches Frequency 58 - 63 3, 64 - 69 5, 70 - 75 ..
Using the economic concepts that explain differences in wages, discuss any three of the following points.* Why does a chief executive earn more than a rocket scientist working for NASA * Why does a teacher earn less than a firefighter
A profit maximizing firm produces three products X, Y and Z. The firm has no costs. There are three customers 1, 2 and 3. What will be the price of each product if the firm decides to sell them separately?
According to your estimate, elucidate what happens to the Transit Authorityas revenue when the fare increases.
You learn that the demand curve facing a monopolist can be written as P = 100 - 5Q, and the monopolist's marginal costs are constant at MC = 60. There are no fixed costs. Write down the equation of the marginal revenue curve for this monopolist.
At the end of 1987, you bought a piece of land for $35,000. In addition to the $35,000, you paid $1,700 in closing costs (costs associated with the purchase and title registration). For the years 1988 through 2002, you paid, on average, $950 in pr..
Compute the elasticities of demand for and supply of broccoli at the market equilibrium, and interpret the meaning of these numbers.
Suppose that the demand function is given by x=P^-n, and the supply function by y= p^e. Determine the equilibrium price. Determine the effect on the equilibrium price of the introduction of a tax t=0.1
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