Econ 452: Industrial Organization
Fall, 2013
Problem Set 1 Suggested Solutions
1. Problem 3 Chapter 1.
In general, the Clayton Act was designed to prevent monopoly in its incipiency by making
explicitly illegal a number of business practices. In particula
Problem Set 1
Chapter 1 - #3
Section 2 prohibits price discrimination, section 7 prohibits holding companies from creating
monopoly-like situations.
Chapter 1 - #5
Price-fixing agreements among different firms disadvantages the consumers and lets firms
co
Problem Set 6
1.
a.
Good 1 Monopoly Price:
If p <= 2, Max profit=6
If 2 <p <= 4, Max profit = 8
If 4< p < = 6, Max profit = 6
If p >6, profit = 0
P* = 4
Good 2 Monopoly Price:
If p <= 2, Max profit=6
If 2 <p <= 4, Max profit = 8
If 4< p < = 5, Max profit
Problem Set #5
Chapter 7, Problem 1
A.
There are two Nash Equilibriums in this game. They are Small-Small and Large-Large.
B.
The pareto optimum is Small-Small.
Chapter 7, Problem #2
A.
The intercept is 20 because all 20 of the outcasts will be there no m
Problem Set 2
1. Chapter 4, #1
Assumptions:
Industry is comprised of n equal size firms
Price Elasticity of Demand = -1
Expenditures on the product are constant at E
Cost Function for each firm: C(qi) = cqi + F (c and F are positive)
Given/Known:
L = -1/(
Econ 452: Industrial Organization
Fall, 2013
Problem Set 5 (Suggested Solutions)
1. Problem 1 Chapter 7.
This is a classic matching problem. The easiest way to find the Nash equilibrium is to first
eliminate from each row the dominated strategies for Harr
Econ 452: Industrial Organization
Fall, 2013
Problem Set 2
Due on: September 23 11:00 p.m.
1. Problem 1 Chapter 4.
Firms will enter until profit is zero, so (P-c) qi F=0. Since in equilibrium qi= Q/n, this means
(P-c) Q /n F=0, which we can rewrite as
=
Econ 452: Industrial Organization
PS6 Suggested Solutions
Washington University in St Louis
TA: Andrs Hincapi
e
e
Fall, 2013
1
Problem 1.
Part (a). Firm chooses price for each good j cfw_1, 2 to maximize prots. Notice that it might
not serve the entire ma
Econ 452: Industrial Organization
PS4 Suggested Solutions
Washington University in St Louis
TA: Andrs Hincapi
e
e
Fall, 2013
1
Problem 1.
Assume WLOG that 2 > 1 . We want to show that under some conditions
denition of V (i , qi ) and the participation con
Problem Set 3
Part I:
1.
True. An industry that contains a large number of identical firms can be modeled with perfect
competition. In the long run in perfect competition, Average Cost and Marginal Cost are equal at
the equilibrium point.
2.
False. While