Consider a homogeneous product industry with three firms 1, 2, and 3 that engage in simultaneous quantity competition. All firms incur identical constant marginal cost c and no fixed cost. Inverse linear demand is given by p 1-q where q denotes total market output. (a) Find the equilibrium quantities, price, and profits. (b) Consider now a merger between firms 1 and 2, resulting in a duopolistic market structure. In fact, the merger gives rise to efficiency gains in the sense that the merged entity produces at marginal cost e c, where e < 1. The outsider to the merger still incurs marginal cost c. Find the post-merger equilibrium quantities, price, and profits. (c) Under what conditions does the merger reduce prices? no copy paste answers or chatgpt
Consider a homogeneous product industry with three firms 1, 2, and 3 that engage in simultaneous quantity competition. All firms incur identical constant marginal cost c and no fixed cost. Inverse linear demand is given by p 1-q where q denotes total market output. (a) Find the equilibrium quantities, price, and profits. (b) Consider now a merger between firms 1 and 2, resulting in a duopolistic market structure. In fact, the merger gives rise to efficiency gains in the sense that the merged entity produces at marginal cost e c, where e < 1. The outsider to the merger still incurs marginal cost c. Find the post-merger equilibrium quantities, price, and profits. (c) Under what conditions does the merger reduce prices? no copy paste answers or chatgpt
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter12: Price And Output Determination: Oligopoly
Section: Chapter Questions
Problem 2E
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