Tutorial_10_Questions - – Q but firms have asymmetric...

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Tutorial 10 Game Theory Hand in all questions on 8 May 2009 1. In the lecture on Tuesday we covered the derivation of the reaction function of Coke within the Bertrand Price Competition with Horizontally Differentiated products framework. Derive the best response (reaction) function for Pepsi using the method used in the lecture. (Clearly show all the steps) [All the necessary information can be found in the lecture slides and/or page 256 of Economics of Strategy]. 2. Consider the Cournot duopoly model where inverse demand is P(Q) =a
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Unformatted text preview: – Q but firms have asymmetric marginal costs i.e. c 1 and c 2 for Firm 1 and Firm 2 respectively. Find the Nash equilibrium. Find Equilibrium Total Output. If c 1 >c 2 show mathematically that Firm 1 produces more output than Firm 2. 3. Assume Bertrand duopoly with homogenous products. But firms have asymmetric marginal costs with c 1 >c 2 . What is the Nash Equilibrium? What is Equilibrium Market Price? If there were fixed costs to entry what would you expect to happen?...
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