DuopolyNash01 - Duopoly & Games 1. T F In Cournot...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Duopoly & Games 1. T F In Cournot equilibrium each firm chooses the quantity that maximizes its own profits assuming that the firm's rival will continue to sell at the same price as before. 2. T F In Bertrand competition between two firms, each firm believes that if it changes its output, the rival firm will change its output by the same amount. 5. T F In the Cournot model, each firm chooses its actions on the assumption that its rivals will react by changing their quantities in such a way as to maximize their own profits. 9. The demand for y is given by y=256/p 2 . Only two firms produce y. They have identical costs c(y)=y 2 . If they agree to collude and maximize their joint profits, how much output will each firm produce? A. 2 B. 5 C. 10 D. 12 E. 16 Correct Answer 1 F 2 F 5 F 9 A set MR=MC and solve. See below no 9. Industry output=Y and each firms output=y. So Y=2y from Y=256/p 2 we get R=pY=256/p and solving for p from Y=256/p 2 , p=(256) 1/2 Y -1/2 so R= (256) 1/2 Y 1/2 = 16Y 1/2 , on taking derivatives, MR= 8 Y -1/2 , remember Y=2y MC=2y=MR=8(2y) -1/2 , So (2y) 3/2 =8 8y 3 =64 y 3 =8 y=2 Nash 1. T F A situation where everyone is playing a dominant strategy must be a Nash
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 08/25/2009 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

Page1 / 3

DuopolyNash01 - Duopoly & Games 1. T F In Cournot...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online