ECON 321, Prof. Hogendorn
Problem Set 3
1. Shy6.8.3. Consider a 3-rm version of the Stackelberg game. Assume
that market inverse demand is given by p = 120 Q, and suppose that
there are three rms that set their output sequentially: rm 1 sets q1 in
period
ECON 321, Professor Hogendorn, Spring 2013
Midterm Exam Answers
1. In an address model, each consumers ideal product is located at
their address or location in a product space. When consumers
travel to the locations of other products, they incur a transpo
ECON 321, Class 21: Shy, Network Eects
1. Read Section 1.
2. Read Section 2. ese are oen called direct network externalities.
3. Read Section 3.0 and 3.1 carefully. Look at the review problem below
called ShyNetworks2.5.2 for guidance. en do problem #1 Gi
ECON 321, Prof. Hogendorn
Problem Set 1 Answers
1. Shy5-3_a.
1
2. KmartWalMart_a. In this case, Wal-Mart has M CW = 0.9 while Kmart has M CK = 1. So to begin, we nd the Cournot reaction function for a rm 1 with marginal cost c facing a rival rm 2: max = (
ECON 321, Prof. Hogendorn
Problem Set 3 Answers
1. Shy6.8.3_a. We have to work backwards, starting with stage 3. At that point, q1 and q2 are given, and firm 3 maximizes: max 3 = (120 - q1 - q2 - q3 )q3
q3
is gives first order condition 3 = 120 - q1 - q2
ECON 321, Prof. Hogendorn, Spring 2009
Midterm Exam Answers
1. Chocolate. Two firms supply cacao at a wholesale market in Trinidad. Firm 1 has always had lower costs than firm 2, reflected by constant marginal costs c1 < c2 . Market demand for cocoa at th
ECON 321, Prof. Hogendorn, Spring 2009
Midterm Exam
Each part of each question (a, b, c, etc.) is worth 5 points. Make sure to allot your time accordingly. Total of 30 points, -1 for messiness, -2 for extreme messiness.
1. Chocolate. Two firms supply caca
ECON 321, Prof. Hogendorn
Problem Set 1
1. Shy5-3. Suppose that a monopoly can price discriminate between two
markets: market 1 where the demand curve is given by q1 = 2 p1
and market 2 where the demand curve is given by q2 = 4 p2 . Suppose that once the
ECON 321, Prof. Hogendorn
Problem Set 4
1. AccBert. Suppose that in period 2 of a game, there are two firms that are differentiated Bertrand competitors with the demand system we worked with before: q1 = 1 - 0.3p1 + 0.1p2 Firm 2 has marginal cost of 1. In
ECON 321, Prof. Hogendorn
Problem Set 2 Answers
1. BertrandCollusion_a. (a) Firm 1's prot maximization problem is: max 1 (p1 , p2 ) = (p1 1)(1 0.3p1 + 0.1p2 )
p1
Its rst order condition is: = 1.3 0.6p1 + 0.1p2 = 0 p1 Solving for p1 and exploiting the symm
ECON 321, Prof. Hogendorn
Problem Set 2
1. BertrandCollusion. ere are two rms which are dierentiated Bertrand
competitors. ey have demand curves:
q1 = 1 0.3p1 + 0.1p2
q2 = 1 0.3p2 + 0.1p1
e rms have identical, constant marginal costs of $1 per unit.
(a) W
ECON 321, Professor Hogendorn, Spring 2013
Midterm Exam
Each part of each question (a, b, c, etc.) is worth 5 points. Make sure to
allot your time accordingly. Total of 30 points, -1 for messiness, -2 for
extreme messiness.
1. What is the difference betwe