TAKEHOMEF07 - Econ 160A(DUE WEDNESDAY 14TH OF November...

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

View Full Document Right Arrow Icon
Econ 160A (DUE WEDNESDAY 14 TH OF November) Problem 1 Answer True, False or Uncertain and explain why In the last fifty years there has been a huge increase in the amount of resources devoted to R&D in the pharmaceutical industry. This fact is key to understand the evolution of the long run (pharmaceutical) industry structure. The increase of competition in the electricity industry will cause a wave of mergers among the firms of the sector. The existence of a fixed capacity of production for all firms in a market implies that is impossible that a cartel can be formed. It is easier to get a collusive agreement that is a Subgame Perfect Nash Equilibrium if we consider that the firms play the same game N periods instead of 1. There were two major audio equipment dealers in New York in the 80s: Crazy Eddie and Newmark & Lewis. Crazy Eddie claimed in its ads that he is never going to be undersold. Newmark & Lewis promised to pay double the difference between its price and a competitor’s lower price. The strength of price competition in this sector increased consumer’s surplus of New Yorkers. Problem 2 Take the Bertrand model with two firms, A and B, and the same assumptions we made in class. The only difference is that Marginal Cost of Firm A is larger than Marginal Cost of firm B. Find a Nash equilibrium and justify it. (Don’t worry about uniqueness)
Image of page 1

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

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

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern