There are two different market under the Galata Bridge. One of them is fried fish sandwich and the other is pickle. Consider two Cournot competitors selling goods with demand curves given by: PF = 100 - qF + 0.5qp Pp = 100 - qp + 0.5qF Here F and P indices refer fish and pickle markets respectively. For the sake of simplicity, assume that there is only one seller in each market. Suppose each firm has a marginal and average cost of $10. a. Using demand equations what can you say these two goods? Are they complement, substitutes or irrelevant? How do they differ from the standard Cournot model? b. Find the equilibrium prices and quantities. c. Suppose the two firms merge. By doing so, the newly merged firm will act to maximize the joint profits Find the joint-profit maximizing price and quantities.

There are two different market under the Galata Bridge. One of them is fried fish sandwich and the other is pickle. Consider two Cournot competitors selling goods with demand curves given by: PF = 100 - qF + 0.5qp Pp = 100 - qp + 0.5qF Here F and P indices refer fish and pickle markets respectively. For the sake of simplicity, assume that there is only one seller in each market. Suppose each firm has a marginal and average cost of $10. a. Using demand equations what can you say these two goods? Are they complement, substitutes or irrelevant? How do they differ from the standard Cournot model? b. Find the equilibrium prices and quantities. c. Suppose the two firms merge. By doing so, the newly merged firm will act to maximize the joint profits Find the joint-profit maximizing price and quantities.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.6P

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