Problem_set_6

Problem_set_6 - Kaushik Basu Spring 2008 Econ 367...

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Kaushik Basu Spring 2008 Econ 367 Game-Theoretic Methods Problem Set 6 1. There are two Cournot duopolists, 1 and 2, selling oil from their private wells, who face the demand function. . 100 P Q - = They can produce the good (oil in this case) costlessly. Using i Q to denote duopolist i's sales, write down the profit (or payoff) functions of both duopolists. What is the Nash equilibrium output level for each producer? Show that both producers can do better if they jointly deviate to some other output level. Producer 2 has an upper bound of 20 units on what he can produce. In other words, for some technical reason the 2 Q that he chooses has to be less than or equal to 20. All other descriptions given above remain unchanged. Describe the Nash equilibrium for this altered game. 2. Consider two duopolists facing the same demand curve as in question 1 and once again with costless production. Now suppose they play a Bertrand game where each announces a price and all consumers go to the one who announces the lower
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This note was uploaded on 03/31/2008 for the course ECON 3670 taught by Professor Basu during the Spring '08 term at Cornell.

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Problem_set_6 - Kaushik Basu Spring 2008 Econ 367...

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