Suppose there are two firms producing crude oil in the market

Economics Dec 06, 2020

Suppose there are two firms producing crude oil in the market. The market demand function is linear. The marginal costs of the two firms are constant and symmetric. There is no fixed cost. Which of the following model has the highest level of deadweight loss? O Bertrand model O Cartel (monopoly) model O Stackelberg model O Cournot model Consider the following simultaneous-move game. How many Nash equilibria does the game have? (We do not consider randomization.) Player 2 L ? R U 0,0 -10, 6 16, -10 Player 1 M 6, -10 O, O -8, 4 D -10, 16 4, -8 o, o O 1 ?? 04 O2 3

Expert Solution

1) Solution: Cournot duopoly
Explanation: The market with a constant marginal cost of production and linear demand curve there are reaction functions for the Cournot duopoly sellers as a straight lines

2) Solution: 3
Explanation: There are three nash equilibria of this game

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