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ECON400 HW assignment 5 due December 8 in classQuestion 1. Pricing of Multiple Products -1 DemandProduct 1q1=a1-b1*p1+d1*p2Product 2q2=a2-b2*p2+d2*p1ParametersValuesa1120b12d11a2120b22d21Find the profit-maximizing prices (P1, P2) for Product 1 and Product 2 for a multi-product monopoly. Find the associated monopoly profit.Find the equilibrium in the market where Product 1 and Product 2 are sold by two independent firms (Firm 1 and Firm 2). Find the associated profits of Firm 1 and Firm 2.Compare the prices in 1. and 2. Explain why a monopolist selling two products (Product 1 and Product 2) would charge a higher or lower price than two independent firms selling these products.Is it profitable for Firm 1 and Firm 2 to merge to become a multi-product monopoly? Compare the profits before and after the potential merger. Explain.Using Excel, draw best-response functions for firms 1 and 2. Label the axes and the functions plotted. Cut and paste the figure into the Word file. Note: you can use an Excel file “Pricing of Multiple Products” uploaded on Blackboard. Question 2. Pricing of Multiple Products-2 DemandProduct 1q1=a1-b1*p1+d1*p2Product 2q2=a2-b2*p2+d2*p1ParametersValuesa1120b12d1-1a2120b22d2-1Find the profit-maximizing prices (P1, P2) for Product 1 and Product 2 for a multi-product monopoly. Find the associated monopoly profit.Find the equilibrium in the market where Product 1 and Product 2 are sold by two independent firms (Firm 1 and Firm 2). Find the associated profits of Firm 1 and Firm 2.Compare the prices in 1. and 2. Explain why a monopolist selling two products (Product 1 and Product 2) would charge a higher or lower price than two independent firms selling these products.Is it profitable for Firm 1 and Firm 2 to merge to become multi-product monopoly? Compare the profits before and after the potential merger. Explain.Using Excel, draw best-response functions for firms 1 and 2. Label the axes and the functions plotted. Cut and paste the figure into the Word file. Note: you can use an Excel file “Pricing of Multiple Products” uploaded on Blackboard. Question 3. Contest A manufacturer promises to give a prize to one of two dealers who wins a sales contest. The value of the prize is V=10 to each dealer. The dealers compete by spending sales effort xi. The probability of winning is of the Tullock form: p1(x₁,x₂)= x₁/(x₁+x₂) and p2(x₁,x₂)= x₂/(x₁+x₂). Dealers have the same constant marginal cost of effort, c=1.1. Write down firm 1's expected payoff from participating in the sales contest.2. Find the best response of firm 1.3. Are effort levels strategic substitutes or complements? Explain.4. By analogy, write the best response of firm 2.5. The firms are symmetric in all respects. Using the symmetry, find the equilibrium sales efforts, x₁ and x₂.6. What is the extent of rent dissipation (that is, what fraction of the prize value V is spent in rent-seeking efforts)?7. Would dealers choose to participate in the sales contest? What are their expected equilibrium payoffs from participation in the contest?8. Sketch the best-response functions or use Excel to draw them. Mark the Nash equilibrium.
Managerial Economics HW

Managerial Economics HW

Question # 00147155 Posted By: zeepoopie Updated on: 12/07/2015 02:15 PM Due on: 12/07/2015
Subject Economics Topic Managerial Economics Tutorials:
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Hi, this is a problem set from managerial economics that I need solved. It is due tonight. I appreciate your help
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Pricing_of_Multiple_Products(1)-2.xlsx (11.98 KB)
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