ps8s Duopolies

Solve for the nash equilibrium how much will each rm

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Unformatted text preview: t “best reply” function using the information given. Solve for the Nash equilibrium; how much will each firm produce? (b) Suppose instead that a single firm produces the Flibquats, as a monopolist. How much would it produce? 2 Problem
Set
8
 Econ
115a
 Spring
2010
 
 1. Define:
 a. Price
discrimination
 Price
discrimination
is
a
practice
that
firms
with
some
market
power
 (typically
monopolists
or
oligopolists)
may
engage
in
where
they
sell
 their
product
at
different
prices
to
different
consumers
in
an
effort
to
 capture
more
of
the
consumers’
willingness
to
pay
(consumer
 surplus).
 
 b. Nash
equilibrium
 A
Nash
equilibrium
is
a
prediction
that
the
strategy
employed
by
each
 individual
will
be
the
best
response
to
the
strategies
employed
by
 everyone
else.

In
a
duopoly,
it
is
the
intersection
of
each
firm’s
“Best
 Response”
line.
 
 c. Duopoly
 A
duopoly
exists
when
there
are
only
two
sellers
of
a
particular
good.
 
 2. Two
Congressmen
are
trying
to
decide
whether
to
vote
for
a
proposed
law.
Call
the
 two
Congressmen
Frank
and
Beans.

The
Congressmen’s
constituents
hate
the
law.

 Each
belongs
to
the
party
that
...
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This document was uploaded on 03/27/2014 for the course ECON 115 at Yale.

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