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The inverse-market demand curve for DRAM chips is P = 50 - Q, where Q is the total industry output and P is the market price. The marginal cost of producing DRAM's is $15. There are no fixed costs associated with producing the chips.
A. Assume that DRAM chips are only produced by Samsung. What price will Samsung set for DRAM chips? What will be Samsung's level of profits?
B. Lucky Goldstar (LG) will now compete with Samsung. Goldstar and LG incur the same marginal cost of production, $15. Each firm has Cournot consistent beliefs. What will be the Cournot equilibrium price?
C. Samsung continues to face one competitor, GS, but now Samsung is the Stackelberg leader. What will be the equilibrium price? Level of output for GS? Samsung?
D. Now assume that Goldstar and LG have Bertrand consistent beliefs. What will be the Bertrand equilibrium price? How did you derive this price?
E. Compare the level of consumer surplus in scenarios A through D.

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9491593

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