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There are two firms in the cement industry,




(i) There are two firms in the cement industry, Acme and Bollard. The demand curve for cement is given by q = 450 ? 0.25p. Each firm has one manufacturing plant and each firm i has a cost function C(qi) = qi^2, where qi is the output of firm i.;a. Derive Acme?s and Bollard?s reaction functions.;b. If Acme and Bollard formed a cartel, what would industry output, price and profits per firm be?;c. What is the Cournot level of output for each firm? How much profits would each firm receive at this equilibrium?;d. Now suppose that Acme is the Stackelberg leader in this industry and Bollard is the Stackelberg follower. What will output and profits for each firm be at this equilibrium?


Paper#28487 | Written in 18-Jul-2015

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