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hw5a - n increases 2 Assuming that there are 2 firms only...

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ISyE 4803 – HW5 1. In class we looked at the case where 4 firms competed in an oligopoly (i.e., chose quantity each period) with the following structure: The unit production cost of each firm i is c and the market-demand function is given by: = = - = 4 1 0 , , ) ( i i q Q b a bQ a Q p a. Find the equilibrium order quantity (we did this for 2 firms in class…note that the solution of this simultaneous move game is known as a Cournot equilibrium). b. Compare the answer to a competitive market (i.e., where each firm is a price taker) and a monopoly (which would model complete collusion among the 4 firms). c. How does the comparison in b. change as
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Unformatted text preview: n increases? 2. Assuming that there are 2 firms only, repeat the results for problem 1 doing the following: a. Player 1 chooses her output quantity first. Player 2 observing player one then chooses his output quantity (note the solution of this sequential move game is known as a Stackelberg equilibrium). b. Players 1 and 2 move simultaneously, but choose price rather than output quantity (note that the solution to this game is known as a Bertrand equilibrium). 3. Compare the 2-firm profits made under Cournot, Stackelberg, and Bertrand....
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