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Market Demand Assignment | Homework For You

Author:
February 21st, 2020

Sam and Sharon produce the same homogeneous product. Market demand is

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P = 80 – 4(qE+qS)Homework For You

where qE is Sam’s output and qS is Sharon’s output. Neither firm has any costs, so in that respect business is good. The problem is, they can’t decide how to behave toward one another. One day they want to collude and act like a joint monopoly; the next day they are at each other like Cournot competitors; but by the end of the week they think they are Bertrand competitors! Then it just starts all over again.

Complete the following table, filling in equilibrium values of the respective variables under the different sorts of competition between these two firms.

Competition q*E q*S q*E+q*S P* II*E II*s II*E+II*S
Joint Monopoly
Cournot
Bertrand

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