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Social Science Clinic => Economics => Microeconomics => Topic started by: chads108 on Jun 18, 2019

Title: Suppose the demand for pizza in a small isolated town is p = 10 - Q. The only two firms, A and B, ...
Post by: chads108 on Jun 18, 2019

Suppose the demand for pizza in a small isolated town is p = 10 - Q. The only two firms, A and B, behave as Cournot duopolists. Each has a cost function TC = 2 + Q. If the government wants to subsidize firm A to raise its output to that of a Stackelberg leader, how large should the subsidy be?

Title: Suppose the demand for pizza in a small isolated town is p = 10 - Q. The only two firms, A and B, ...
Post by: kristenb95 on Jun 18, 2019

Firm B's profit is π = [10 - (qA + qB)]qB - 2 - qB. Maximizing with respect to its own output yields firm B's best response qB = 4.5 - qA/2. Knowing this, firm A substitutes this into demand and maximizes its profit. π = [10 - qA - (4.5 - qA/2)]qA - 2 - qA. Maximizing with respect to qA yields qA = 4.5. Firm B responds by producing 2.25. The subsidy (S) must make firm A choose 4.5 units while acting as a Cournot firm. Firm A's reaction function as a Cournot firm is . Setting qA= 4.5 and qB = 2.25 yields a subsidy of 2.25 per unit.

Title: Re: Suppose the demand for pizza in a small isolated town is p = 10 - Q. The only two firms, A and B
Post by: 梁映月 on May 11, 2022

thank you

Title: Re: Suppose the demand for pizza in a small isolated town is p = 10 - Q. The only two firms, A and B
Post by: An Ann on May 12, 2022

thank you

Title: Re: Suppose the demand for pizza in a small isolated town is p = 10 - Q. The only two firms, A and B
Post by: thucanh02 on May 12, 2022

Thank you

Title: Re: Suppose the demand for pizza in a small isolated town is p = 10 - Q. The only two firms, A and B
Post by: on May 12, 2022

thank you