Economics assignment Example | Topics and Well Written Essays - 1500 words - 1

Economics - Assignment Example6 & 7 of Shy or the notes).Prices fall and quantity supplied increases. The economic social welfare is better than in the cournot conditions. Although profits fall, consumer surplus increases and equilibrium approaches the competitive case.2) Now lets find out if the above results you derived are actually line up Use the StackelbergSolver macro and enter the data with marginal cost = 4, a = 1,000 and b = -2 and derive the Stackelberg results. Of course you are also going to have to apply the CournotSolver. Why? Explain your results. Do your results conform to the theory you provided above in problem 1? Display your results.In the Bertrand position, the firms set tolls simultaneously instead of quantity. The model is only valid in an oligopolistic, mart structure where there are few firms selling too many buyers. As matter of fact, its easier and cheaper to decline hurts than quantity. However, the process of wrongd cuts can be risky.Equilibrium p rice and quantity in a Bertrand model is the competitive equilibrium. Note that the firms can either set price or quantity but not both. In the Bertrand model the firms set price simultaneously.Consider a 2-firm case, suppose firm 1 moves first and sets price p MC, in an effort to maximize profit. Firm 2 will have an incentive to lower the price such that p1p2MC, to capture a larger market share. Rationally, consumers will shift to the lower price, p2 and firm 1 will make zero profits. The assumption is that, consumers are well informed and the products are homogeneous.Firm 1will and then cut its price making it lower than P2. The game continues until both firms charge a price equal to MC, and make zero economic profits. At this price no firm would either raise prices leads to zero sales, or lower prices at p 5) a) Below is a table showing the payoffs for price strategies that all(prenominal) of 2 firms can make. These profits are derived from the