Homework 7 Managerial Economics Due no later than the end of day, Friday, November 6, 2020 Instructions: Show all of your work!!!! Then scan to a pdf, or if necessary take pictures of your work (scanning to pdf preferred)

Homework 7

Managerial Economics

Due no later than the end of day, Friday, November 6, 2020

Instructions: Show all of your work!!!! Then scan to a pdf, or if necessary take pictures of your work (scanning to pdf preferred). Upload your complete assignment using the Blackboard link provided. 

Please submit pdf, Word, and jpeg files only!

1. Consider 2 airplane manufacturers that compete as Cournot duopolists in the market for commercial aircraft. Arrowing (firm A) has a cost function given by

   

   , whereas

SkyTrain (firm S) has a cost function given by

. The market demand function for commercial airliners is given by:

????????=????????????????????????−????????????????

where

 is the sum of the quantity of planes available for purchase. 

1. 1. 1. If the two companies choose the quantities of trips supplied simultaneously, find the Cournot equilibrium quantities supplied for each firm and the equilibrium price.

1. 1. 2. Suppose that firm A has the opportunity to choose their quantity of trips first, so that they are a Stackelberg leader. Find the NE to this game.

1. 1. 3. Compare profits from part (a) and part (b). Would firm A benefit from moving first? Does firm B benefit from moving last?

2. Consider 2 firms selling fertilizer and competing as Cournot duopolists. The inverse demand function facing the fertilizer market is ????????=????????−????????, where ????????=????????_????????+????????_????????. Assume that the cost function for firm A is given by

   

   , whereas the cost function for firm B is given by

1. 1. Find the Cournot Nash equilibrium.  
2. 2. Find the Stackelberg equilibrium where firm A moves first. Compare profits from part (a) and part (. Would firm A benefit from moving first? Does firm B benefit from moving last?