cournot equilibrium, Managerial Economics

Assignment Help:

Air Canada and KLM compete for customers on flights among Amsterdam and Toronto. The total number of passengers (Q) flown by these two firms is the sum of passengers who fly KLM, Qk and those who fly Air Canada, Qc. Suppose that no other companies can enter the route Due to they cannot obtain landing rights at both airports. Market demand is given by:

2302_aa.png

where p is the cost of a one-way flight (in Euros), and Q is claculated in thousands of passengers flying one-way per quarter. Every airline has a constant marginal and average cost of €147 per passenger per flight.

 

a) Determine the Cournot equilibrium.

b)  Assume both airlines receive a subsidy of €54 per passenger. Derive the new Cournot equilibrium. What is the effect of the subsidy? How much of the subsidy is passed on to the passengers?

 

 


Related Discussions:- cournot equilibrium

The position of an economic relationship, Using the relationship among the ...

Using the relationship among the price of a visit to a physiotherapist and the quantity of visits demanded, explain and distinguish between the direction, the slope, and the positi

Meaning of desire for a commodity, Desire for a commodity This validat...

Desire for a commodity This validates that a want or a desire doesn't develop into a demand except it is supported by the ability and willingness to acquire it. For example, a

cost pricing and marginal cost pricing method, Discuss the full cost prici...

Discuss the full cost pricing and marginal cost pricing method. Explain how the two  methods differ from each other.

Determine the studies of managerial economics, Determine the studies of Man...

Determine the studies of Managerial economics Managerial economics studies the application of techniques, principles as well as concepts of economics to managerial problems of

What is managerial economics according to spencer, What is Managerial econo...

What is Managerial economics according to Spencer and Siegelman Spencer and Siegelman:  Managerial economics is "the integration of economic theory with business practice for t

Mixed economy, The Mixed Economy There are no economies in the world w...

The Mixed Economy There are no economies in the world which are entirely 'market' or planned, all will contain elements of both systems. The degree of mix in any one econom

Arbitrage portfolio exist, Consider an economy with three assets and three ...

Consider an economy with three assets and three states. Let be the matrix of asset payoffs at t=1 and p the vector of asset prices at t=0. Assume p 3 =2.  a) Does an ar

Production-possibilities, a) A change in demand means that: b) On the pr...

a) A change in demand means that: b) On the production-possibilities drawing, unemployment is represented by:

Development of skilled labour - external economies, Q. Development of Skill...

Q. Development of Skilled Labour - External Economies? As the industry grows training facilities for labour will increase. This helps development of skilled labour that would i

Voluntary monopoly through combinations, To eliminate competition and there...

To eliminate competition and thereby secure higher prices, firms producing a specific product can come together and make monopoly agreements. These are called as industrial combina

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd