workshop 1 - product then they will make zero economic...

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ECOS2201 - Economics of Competition and Strategy Workshop - 1 1. Distinguish between strategic and tactical variables and relate them to game theory 2. Why does independent provision of complementary products generally result in too few being produced relative to the profit maximising number. What strategies may firms follow to overcome this problem? 3. What is meant by a best response function and a Nash equilibrium. Why are these concepts important in understanding business strategy 4. True, False, Uncertain, Explain. If two firms choose an identical quality for there
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Unformatted text preview: product then they will make zero economic profit 5. Two firms, 1 and 2 produce a homogenous product. Their outputs are q 1 and q 2 . Let demand be p = 100-1 3 Q, where Q = q 1 + q 2 . (a) Initially marginal costs are c 1 = 10 = c 2 . Find Nash equilibrium (NE) outputs. Show best response functions on a diagram and also show NE on this diagram, be accurate. (b) Firm 1 discovers a new technology which reduces its marginal cost to c 1 = 5 . Find the new NE outputs and show on a diagram. calculate the profit of each firm in this NE. 1...
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