PS 10 - Solutions
May 6, 2016
1
Stackelberg
1. q1 =
ac
, q2
2b
=
ac
.
4b
2. If F2 is really large such that any positive production leads negative profit, firm 2
will not engage in production. Firm 1 will produce the monopoly quantity.
3. Firm 1 knows fir
Midterm 2 - Solutions
April 26, 2016
1
Short Answer (24 points)
1. (6 points) True or false: a monopolist engaging in nonlinear pricing is inefficient.
Explain.
Answer: False. Counter examples include first-degree price discrimination, block
pricing and t
PS 8 - Solutions
April 26, 2016
1
Stackelberg
1. Firm 1s problem
max [a b(q1 + q2 )]q1 cq1
q1
FOC gives the best response function (this is also the equilibrium strategy):
q1 (q2 ) =
a c q2
.
2b
2
q2 (q1 ) =
a c q1
.
2b
2
The problem is symmetric so
Equ
Problem Set: Endogenous Location and Prices
Due 4/26/2016 at the beginning of class
Consider the horizontal quality model on the unit interval from 0 to 1. There are N
consumers located uniformly along the interval. There are two firms, with zero marginal
Problem Set: Entry Deterrence
Due 4/28/2016
Let the inverse demand curve be p(Q) = a bQ. There are two firms with constant
marginal costs of c and fixed costs of F1 and F2 which are incurred only if a positive quantity
is produced.
1
Stackelberg
Suppose t
PS 5 - Solutions
March 19, 2016
1. A monopolistic producer faces the tradeoff that as it expands the output, it has to
sell all the previously sold units at a lower price. The monopolist thus restricts its
output to be lower than socially optimal level, i
Problem Set: Stackelberg and Price Games
Due Tuesday April 19
1
Stackelberg
Let the inverse demand curve be p(q) = a bq. Suppose there are two firms, with constant
marginal cost equal to c.
1. (Cournot) If both firms move simultaneously, what are their eq
Midterm 2
Industrial Organization, Spring 2016, Prof. Ryan
April 7, 2016
You are required to answer the short answer questions and 2 out of 3 of the long answer
questions.
1 Short Answer (24 points)
1. (6 points) True or false: a monopolist engaging in no
PS5: Nonlinear Pricing
Due at the beginning of class on March 8th, 2016
1. Earlier in the semester, we saw that monopolist internalizes the effect of its production
on prices, which leads to a contraction of output. Explain why giving the monopolist
the f
ANSWERS TO PROBLEM SET 3 3.4 (i) A larger rank for a law school means that the school has less prestige; this lowers starting salaries. For example, a rank of 100 means there are 99 schools thought to be better.
(ii) > 0, > 0. Both LSAT and GPA are measur
ANSWERS PS2
2.4 (i) When cigs = 0, predicted birth weight is 119.77 ounces. When cigs = 20, = 109.49. This is about an 8.6% drop. (ii) Not necessarily. There are many other factors that can affect birth weight, particularly overall health of the mother an
PS 9 - Solutions
April 29, 2016
Consider the horizontal quality model on the unit interval from 0 to 1. There are N
consumers located uniformly along the interval. There are two firms, with zero marginal
costs, initially located at 0 and 1. Consumers will