HW3 - conclusion about the change from monopoly to duopoly...

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ECON 4697 IO & Regulation Homework 3, Due March 20, 2008 Q1. Let Internet market demand be p = 100 – Q. A monopoly Internet provider produces household subscriptions with constant marginal c (= AC) = $10. Given the provider’s choice variable is its quantity of output (i.e., subscriptions), calculate society’s deadweight loss (i.e., allocative inefficiency) in this market. Q2. Let Internet market demand be p = 100 – Q. Two identical Internet providers produce output with constant marginal c (= AC) = $10. (i) Given the Cournot assumption, calculate society’s deadweight loss in this market (hint : use the results established at the end of Topic 9). (ii) What is the duopoly structure’s allocative inefficiency as a share of the original monopoly deadweight loss? Compare to Q1 and make a
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Unformatted text preview: conclusion about the change from monopoly to duopoly market structure. Q3. Briefly explain (in words) the intuition underlying the Cournot equilibrium for a duopoly (hint : think why the equilibrium occurs at the intersection of each firms best response function). Q4. (i) Cabral (2000; p. 146): review & practice question 8.1. (ii) Cabral (2000; p. 148): review & practice question 8.8. Q5. Research question (please keep it short and sweet) (i) Like most contemporary commercial musical acts The Brian JonesTown Massacre (BJM) distribute their music online. In terms of online distribution, what distinguishes the BJM from most other commercial acts? (ii) What is the significant connection between the BJM and the Black Rebel Motorcycle Club?...
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