11 Firm 1 and Firm 2 operate in the oligopolistic market and sell a heterogeneousproduct. They have agreed that the best solution for them would be tocooperate and to maximize together the joint profit from the whole market. Thetotal production costs of the firms are described by: TC₁ = 491² and TC2 = 592²for q1, q2 ≥ 0, and zero otherwise. The market demand for the products iscaptured by the inverse demand functions: P₁ = 10 – 291 – 92 and P2 = 8 - 91- 92.(a) Determine the production level of each firm and the prices of the products.(b) Do firms have any incentive to deviate from the cooperation agreement?

Given; Total Cost functions:- TC1=4q12TC2=5q22 Demand function:- P1=10-2q1-q2P2=8-q1-q2 Total…

Firm 1 and Firm 2 operate in the oligopolistic market and sell a heterogeneous product. They have agreed that the best solution for them would be to cooperate and to maximize together the joint profit from the whole market. The total production costs of the firms are described by: TC₁ = 4q1² and TC2 = 592² for q1, q2 ≥ 0, and zero otherwise. The market demand for the products is captured by the inverse demand functions: P₁ = 10 - 291 - 92 and P2 = 8 - 91 - 92. (a) Determine the production level of each firm and the prices of the products. (b) Do firms have any incentive to deviate from the cooperation agreement?

Firm 1 and Firm 2 operate in the oligopolistic market and sell a heterogeneous product. They have agreed that the best solution for them would be to cooperate and to maximize together the joint profit from the whole market. The total production costs of the firms are described by: TC₁ = 4q1² and TC2 = 592² for q1, q2 ≥ 0, and zero otherwise. The market demand for the products is captured by the inverse demand functions: P₁ = 10 - 291 - 92 and P2 = 8 - 91 - 92. (a) Determine the production level of each firm and the prices of the products. (b) Do firms have any incentive to deviate from the cooperation agreement?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.1P

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