Econ 106 HW2

Econ 106 HW2 - Econ 106 Managerial Economics Homework 2...

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Econ 106 Managerial Economics Jinmao Xu Homework 2 4715033 Summer 2011 1.(a) q 1 =6.8, q 2 =6.8; (b) Market price P=91.2; π 1 =414.32 π 2 = 414.32; (c) q 1 =9.1, q 2 =5.8; (d) Market price P=80.8; π 1 = 442.27 π 2 = 297.4; 2. (a) q 1 =9.94, q 2 =6.2; (b) Market price P=42.72; π 1 =296.01 π 2 = 114.8; (c) q 1 =11.3, q 2 =5.8; (d) Market price P=40.8; π 1 = 299.45 π 2 = 98.6; 3. (a) Q=10.4; (b) Equilibrium price under collusion P=116.8; (c) Colluding π c 1 + π 2 = 455.92 + 455.92 = 911.84; Not Colluding π nc 1 + π 2 = 414.32 + 414.32 = 828.64. Since π c > π nc , the firms should collude. 4. (a) Q=12.9; (b) Equilibrium price under collusion P=49.2; (c) Colluding π c 1 + π 2 = 295.2+162.45=421.65; Not Colluding π nc 1 + π 2 = 296.01+114.8 = 410.81; Since π c > π nc , the firms should collude. 5. (a) First degree price discriminating quantity Q = 18 and P =39; Profit π= 324; (b) The firm should charge for a block of 18 units at a price of 1026 . So the block price is 1026 dollars and block quantity is 18 units.
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6. (a) Deutsche Telekom owns and operates the fixed telephone network in Germany. Prior to 1996 the German State wholly owned DT and provided all the resources for building its fixed telephone network. In Nov 96, 25% of the equity was sold to private investors. Till 1996 DT was legal monopoly in the retail fixed line telecommunication market. The new entrants needed to invest large sums of the capital to develop a network infrastructure to provide retail telecom services. In 1996, telecommunication Act was passed which required DT to allow new competitors direct access to its infrastructure and thereby more competition in the provision of retail access to the telephone services was
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Econ 106 HW2 - Econ 106 Managerial Economics Homework 2...

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